Monthly Archives: December 2007

What's wrong (or right) with this pricing model?


I bought a small personal laser printer last year. It was on sale at the local electronics chain and cost me all of $79. It is small, less than 1 cubic foot in size, weighs less than 10 lbs, has a 1200×600 dpi print resolution, and is rated at about 22 ppm print speed. This is less than 5% of the price I paid for a far less functional laser printer 15 years ago. Then, I paid over $2000 for a 6ppm, 300×300 dpi printer, that must have weighed 30 pounds.

My little printer came with a toner cartridge that has only now begun to run out, over a year later. I went online to purchase a new toner cartridge. I was surprised (should I have been?) to find that a new toner cartridge cost $99. Now this cartridge will print for about twice as long as the original, but it’s hard for me to get over the fact that the toner cartridge costs more than the printer. How can I purchase a printer and toner for $79, but a replacement toner cartridge costs $99. BTW this is about the same price I paid for toner for my original $2000 laser printer 15 years ago.

Now, I’m used to this scheme with ink-jet cartridges — it’s the old razor blade model. The idea is that you’re not buying a shaver, but in fact, a subscription of sorts, to blades. It’s a recurring revenue model and seems to work for razors. In the context of shaving, it is the blade that has the value — consider the 5 bladed, Fusion razor as an example. If I want a close shave, I focus on the blade. The handle has little value except to enable the blade to do it’s job, but if I like the blade, I will buy and use more.

But in the printer world, it doesn’t apply that easily. At least it did apply 15 years ago, but doesn’t apply today. Why not? If we look at the printer as the handle, and the ink/toner as the blade (recurring revenue stream), it is the handle (printer) that has the real value. The toner/ink only enables the printer to do it’s job.
Also, the “handles” get better and better every year. My little laser printer from last year has been replaced by a better model that is faster and has a couple of additional features as compared to mine and costs about… you guessed it…$79.

But even more important, there are many other printers on the market that I can choose from. Aside from basic laser printers such as the one I purchased, there are colour printers, printer/scanner/copier combos, networkable printers, etc. etc.

The cost of these printers is, in my opinion, incredibly cheap, far below what I believe it costs to make them. I saw an Epson color ink-jet printer/scanner/copier on sale for $29 recently. Think about that. What other technology can I get for $29? Not much. A router. 2GB of RAM. Some flash memory. A video game. A full single colour ink jet cartridge!

So what did I do given this dynamic? Instead of buying a new toner cartridge for $99, I decided to spend $10 dollars more and bought this baby. It prints at 2400×600 dpi, scans, copies, OCRs text and much more. And yes, it comes with a toner cartridge.

So, here’s the question. How viable is this pricing model? Granted, I’m a light user of printers at home. And if I run through 1 or even 2 printer cartridges a year, I’m going to benefit every year from better printers at cheaper prices. I fully expect that a year or two from now, I will be able to get fully networkable, colour laser printer for about what I paid for my monochrome printer this year. How is this sustainable? Or am I in the minority of users who don’t print very much and thus can benefit from such low prices?



Measuring the selling cycle

When I talk to Product Managers about Win/Loss Analysis, one of the first steps I suggest is to analyze the sales funnel to find out where we are losing traction. (Normally I’m focused on places we’re losing traction, but the same thinking applies to figure out what’s working.) From there, we design the win/loss analysis to focus on the stage in the selling cycle where we are having the biggest problem.

The trouble is that funnel ratings are all over the map. There are so many problems … where to start? Some of the most common problems I’ve seen are:

  • sales people don’t use the CRM system reliably, so it can be very time consuming to determing where we are losing, or getting, traction
  •  the ratings systems measure activity by the sales person, but don’t measure activities that the customer performs. Customer activity is a meaningful indicator and should be the primary thing we measure.
  • the resolution of the ratings systems are too high or too low. If there is no rating between “we know their name” and “onsite presentation”, then we really don’t know where we’re at with the top of the funnel. Similarly, if we have too many ratings, the sales people will stop using the ratings, or they will be used unreliably.

As I have said before, I like the CustomerCentric approach to selling. They outline a good way to measure activity throughout the funnel; to advance to a higher rating, the customer needs to agree to something or take action on something, and the CCS approach holds back valuable resources, information, and expertise from the prospect until they perform those actions.

The truth is though, it’s more important that your company trains, uses, and enforces some kind of sales process. Just using one is more important than which one you use. And even if your sales people don’t use a disciplined approach, you can use a framework like CCS to do your own querying for specific opportunities.

Later this week I’ll describe a high-level framework that I like to rank progress through the selling and buying cycles.


Product Manager vs. Product Management (part 3)

How important a role does Product Management play in your company?

Is it truly a strategic role, or is that just what is written in the job descriptions when hiring PMs?

Who sits at the table?
Does Product Management report directly up to the CEO, or does it report through Marketing or Engineering, or heaven forbid, up through Sales. Not that I have anything against the Sales orgs in companies, but if Product Management is reporting up through Sales, the company doesn’t understand the role or the benefits Product Management can provide.

I view Product Management as a key function in a company that should have VP representation at the Sr. Management level. i.e. Product Management should be on par with Sales, Marketing, Engineering, Finance etc. and should not report up through any of them. If that is not the case, then that means that the company views Product Management as subordinate to these other groups and not worthy of “a seat at the table”.

It means that the influence Product Management will have will be subordinate to the influence these other groups have. For example, if Product Management is part of Marketing, and Marketing consists of Corporate Marketing, Product Marketing, Field Marketing and Product Management, guess how much focus and attention Product Management will have from the VP of Marketing, let alone the Sr. Management team?

Are PM roles defined clearly?
Second, it’s very important to clearly define the duties and responsibilities of Product Management and demarcate them from analogous duties that other team may have.

For example, when talking about Competitive Analysis, one must distinguish between the types of competitive analysis that, for example, Product Managers need to help define future releases of products, and the type sales teams need to compete on competitive deals. The end audience for those analyses is important in deciding who will create the particular outputs.

Sales teams need competitive information so they can position products clearly and respond to prospect questions or objections. Sales people may need high level “kill sheets” that list the key benefits and strengths of their offerings, and the key weaknesses and threats of the competition. Sales Engineers working with Sales Managers may need more detailed technical feature/functionality information. This is typically the job of Product Marketing.

Product Managers need very specific information about competitor’s strategic direction (and roadmap if possible), product functionality, limits or shortcomings, as well as key differentiators. i.e. the gaps between what the competitors does (or will do) and what the PMs own product(s) do and will do.

It is based on this type of detailed information that PMs can make the appropriate decisions on how to invest the time and efforts of the development teams to produce future releases of product. But, this kind of information is, in itself, not useful for sales teams.

Now, who can provide this kind of information for Product Management? Likely only other members of the Product Management team — perhaps Technical Product Managers, or Solution Architects or Technical Competitive Analysts — because other groups, such as Product Marketing, or Sales Engineering don’t have a vested interest in doing this work. They have other goals and objectives to focus on.

How to define the roles well?
The question then is how can the roles of the Product Management function be defined for maximum efficiency and benefit? Take a look at the following two diagrams. The first is a relatively well-known Pragmatic Framework diagram from the people at Pragmatic Marketing.

pragmaticmarketing.jpg (click to enlarge)

This diagram defines a number of possible activities ranging from Strategic to Tactical, in various categories such as Market Analysis, Qualitative Analysis, Product Planning, Sales Readiness that various people must complete during the product definition, development and launch cycles. Notice that it does not explicitly define the time frames in which these activities must be enacted, nor does it provide any specific order in which these activities must be completed. It is a generic framework diagram that can be used as a basis for defining the Product Management function in a company.

The second is a not so well-known diagram by yours truly.

pmdeliverables2.jpg (click to enlarge)

This diagram is almost orthogonal to the Pragmatic diagram. It lists specific deliverables that the Product Management function must deliver on during the product definition, development and launch cycles. It is categorized by stages in the development process and not by functional area ranging from strategic to tactical. It is, in fact, a specific implementation of the above Pragmatic framework diagram, tailored to a particular company’s need. Your company may have different needs and thus a somewhat different diagram.

This diagram, backed up by a roughly 20 page document describing each of the deliverables in the grid, down to who participates in completing them and who accepts the deliverables that are generated at each cell in the grid, describes very precisely what Product Management does, and equally importantly, what Product Management doesn’t do. Left out of this diagram are specific activities such as working with sales to help close deals or even, for that matter, visiting customers/prospects. Those are fundamental things that must be done as part of the job and feed into the deliverables listed in the diagram.

So, why go through the exercise of creating the diagrams and supporting definition documents? Well, if you truly want to build a Product Management function in your company then the first thing you need to do is clearly define what that function is responsible for. By defining it this way — what needs to be delivered when, to whom and by whom — the focus is placed on the outputs and those dependent on the outputs (the what) as opposed to the specific tasks that need to be completed (the how). Put another way — the people who depend on Product Management to do their jobs know well in advance, what to expect and when to expect it, without placing specific restrictions on how those deliverables must be completed. That is left to Product Management to decide.

Sounds like a model of efficiency to me. And isn’t that what you’d expect from anyone who has a seat at the Sr. Management table?


The rest of the series
Product Manager vs. Product Management (part 1)
Product Manager vs. Product Management (part 2)
Product Manager vs. Product Management (part 3)
Product Manager vs. Product Management (part 4)
Product Manager vs. Product Management (part 5)
Product Manager vs. Product Management (part 6)

Why Choose This Feature?

Recently I finsihed reading Why Choose This Book?: How We Make Decisions, by Read Montague, a fascinating book about how the brain makes decisions. It brings neuroscience, biology and computer science together to explore some of the latest ideas in how the brains actually makes decisions.

Montague spends a lot of time going over the notion of value and how measuring value is implicit and essential to every decision the brain makes. For example, when you train a dog using rewards the dog eventually obeys because it transfers the value measurement from the act of getting food to the command itself – the dog’s brain actually reprograms itself to see the command as being as good as getting food. (The cynical among you can go and check out What Shamu Taught Me About a Happy Marriage and how to apply these techniques more broadly.)

The book got me thinking – bringing in a value measurement is exactly what Product Managers do in product-oriented decision making. Why choose feature X over feature Y? Because we have some way of measuring the value of each feature. Too often we use an implicit value (“We added for support for AIX at my previous job and it never got us any sales”) but we often manage to do better (“35% of prospects said they would use the product on AIX”). But either way, Product Management is about making decisions by measuring value.

The End of Infrastructure

Yesterday Amazon announced Amazon SimpleDB, an on-demand database service similar to their EC2 and S3 services. With this final piece of the puzzle, Amazon has put an end to the need to own server infrastructure.

Now, don’t get me wrong, Dell, HP and IBM are hardly about to go out of business. But until now one of the biggest barriers to entry in some types of enterprise software was the capital cost of servers (which was already at a historic low). With this on-demand database service, any web-based product you can think of can be deployed without spending a cent on infrastructure. Regardless of what kind of software you sell, today your competitive differentiation just got a little bit smaller.

Does your company have the RIGHT kind of problems?

Having worked at several companies, and known well many others, I’ve seen some patterns, both good and bad, within those companies. WRT problems in companies, some companies can be described as having the right problems to address and others with the wrong problems to address.

What kinds of problems does your company have?

Let me explain, and I’m sure you’ll relate quickly.

Every company has problems. Any time 2 or more people get together to do something of substance, there will be disagreements, different perspectives, different agendas, motivations, goals, frames of reference etc. Ever been in a relationship? :-)

If anyone says they work for a company that has no problems they are either lying or delusional.

When looking at problems they can be classified in many different ways. They can be external or internal, strategic or tactical, short term or long term, easy or difficult, process or structural, financial, personal, cultural, technical etc. etc. etc.

The Wrong Problems
Personal, cultural, structural and financial problems are typically the wrong kinds of problems to have to worry about. The list of such ailments can be a long one:

  • CXO Irrationalis — Crazy ideas of one or more CXOs form company strategy
  • Senior Management Dyfunctia — The executive team is completely limp and useless and no pill can fix it
  • SOTW Syndrome — Strategy of the Week Syndrome
  • BOD Apnea — Board of Directors falls asleep far too often providing no oversight for the company
  • Managerial Cerebral-Rectum Entrenchyitis –Work this one out…you can do it.
  • Frank Sinatra Syndrome — Boss says everything must be done “My Way”
  • Founderitis — Hardening of the brains of the founders
  • PWPF Disorder — Penny Wise, Pound Foolish Disorder. Usually occurs when an influential CMO suffers from CXO Irrationalis.
  • Feudal Lord Syndrome — Personal fiefdoms and silos rampant throughout the company
  • RTMWAC Disease — Rush to Market Without a Clue, and hope for success
  • Lame Product Syndrome — Self explanatory. Better to kill it than let the suffering continue
  • SLFAP Disorder — Solution Looking for a Problem Disorder
  • Field of Dreams Dementia — When a company has a “If we build it, they will come” attitude
  • Analysis Paralysis — an oldie, but a goodie, and far too common
  • Dilbert Syndrome — When your company too closely resembles the Dilbert comic strip
  • Malcolm Crowe Disease — A company that doesn’t realize it’s actually dead. Don’t get the reference? Click here.

There are many more I’m sure. Can you relate to any of these? Can you suggest some others?

If your company suffers from one or more of these, think hard about what you are doing at that company, because in all likelihood, as a Product Manager, your efforts to move things forward are being blocked or hampered and your energies wasted. Unfortunately, I’ve seen some of these in previous companies I worked at.

At one startup, a new CEO called a company meeting to discuss how to turn around the company, which at the time was suffering from SLFAP Disorder. After a number of product ideas were mentioned, I suggested some market research to get a better understanding of what people needed and then decide what to build. I wasn’t even a product manager at the time. The response from the CEO (clearly not suffering from Analysis Paralysis) was that by the time you get the research done, you could have finished building a product and have taken it to market! Needless to say, BOD Apnea helped the company fail under his wise stewardship.

At another company, suffering from a small case of Feudal Lord Syndrome mixed with Field of Dreams Dementia. A particular VP of engineering who had a couple of pet projects he wanted his team to work on, got rebuffed by the product management team who came armed with requirements supported by vast amounts of customer data. And when it was shown that his pet project was low on customer priority lists, he responded: (and I quote)

“The problem with product management is that you talk to too many customers!”

I think his problem with Product Management was that we were doing our jobs; something clearly he didn’t like.

Anyway, if you work in companies with these kinds of problems, I recommend making a hard assessment of whether your time, effort and intellectual abilities are going to make a difference at that company, and whether the rewards you will get outweigh the grief you’ll have to deal with.

If you decide to move on, try to find a company that has what I call, the right kind of problems.

The Right Problems
Quite simply, the right kind of problems are the ones that you look forward to solving when you get into work. Companies typically encounter good problems because they are already successful and need to accelerate growth or are on the path to success.

The kinds of right problems I like to solve include:

  • Identifying new markets to enter
  • Devising plans to attack larger competitors or quickly blocking emerging ones
  • Scaling businesses processes to meet current and future growth
  • Productizing good technology to address new problem spaces
  • Developing and growing teams of high caliber individuals

Note that the right problems aren’t as funny as the wrong problems and there are fewer of them (at least for me), but in the end, they are far less trying, and thus humour is not needed to take the pain away.

Companies with the right kinds of problems have what I call, a “necessary level of rationality”. No company is completely rational or irrational — OK, please someone prove me wrong! — but certainly, companies have different levels of rationality in their management teams, and to be honest, that is where most of the big problems arise that plague companies.

Is the management team a cohesive unit, or are they trying to be captains of their own ships?

Does the CEO have a clear vision and grasp on the company’s ability to execute on his/her vision out of synch with reality?

Are sales and marketing aligned and skilled enough to meet their goals?

Does the engineering team have the ability to build what needs to be built with the level of quality, scalability, performance, flexibility, ease-of-use etc. that is needed?

Does the product management team have the skills to properly understand the market needs and define the solutions that need to be built with the right priority?

Does the company culture enable all these teams to work together to successfully build, market and sell winning products?

Does the company possess the domain knowledge (internally or externally) to compete and succeed in their chosen market or are they reaching for something beyond their know how?

If a company measures negatively on any of these questions, then there is a level of irrationality that will cause churn in the efforts of others. Even the best products can’t succeed without alignment in marketing and sales. Conversely even the best marketing and sales teams will likely flounder unless backed by good product management and engineering. You get my point. Look for companies with a good level of rationality and you’re likely to find a company that has the right problems to solve.

Have you worked at companies with the wrong types of problems? What did you do?

And if you had the pleasure of working at companies with the right kinds of problems, what do you think it was that made the company that way?


To the sales people, you are just a chicken

In my first post on this blog, I mentioned that I had taken on a full-time sales role for the first time. Every one of you should consider a role in sales for a year or two … it is a real education.

It’s not as though I hadn’t “done” sales before. In product management and corporate strategy, I participated in countless sales engagements starting at the first conversation and leading to the roll-out / deployment planning. I have trained dozens of sales people on my products, and after taking Customer Centric Selling myself, I have even been a coach in a CCS seminar put on by Philippe Lavie, a consumate sales person himself.

It is so easy to criticize a sales person, and how many times have I done that myself? Oh, we used to make truly geeky jokes that sales people are like Stateless Session Beans (thankfully the sales people didn’t understand why this got such a laugh). They’re so coin operated. Just order takers. They don’t even understand the product.

I still do believe that the really good sales people are very rare, and I have strong opinions about what makes a good sales person. But I am beginning to understand, in my bones, the real difficulty of the sales job, and it gives me a lot more empathy for the coin operated people in sales. Every phone call matters. I am constantly negotiating. When people don’t call me back, what do I do? (Next!) How do I set up this relationship so that I maintain my own power and not give it all away to the propsect? Will the deal close in time? Forgetting to log my activity in salesforce. Forgetting the status of an account when asked by my boss.

I really do enjoy selling and sales, and I will be doing this for some time to be sure. Personally I think I’m good at it and I’ve had some wins, along with some errors that led to failures. And certainly some failures that were not my fault, and wins for which I should take no credit. There is a certain Tao to it all.

But I caution you … the next time you get upset with a sales person, think again. It’s like the man said: When it comes to the breakfast, the chicken is interested, but the pig is committed. And when you are sitting in product management, the pigs in sales look at you and all they see is a chicken. Drop off your eggs and keep moving buddy, I’m making some bacon here.

I am personally glad that I started on the product side. But after sitting in sales for just about 9 months now, I can’t recommend it strongly enough: At some point in your career, take a commissioned sales position, and not just an SE role. Be the seller, and stay there for a couple of years. Stay there until you get it right.

Come on, what are you? Chicken?

- Alan

Thank you Plaxo: You synchronize my life

For years I have wanted this service. Some promised, but no one delivered. And now along comes Plaxo.

I remember Plaxo a bit in the same way that I remember PointCast. PointCast was really a first generation RSS reader, in that it would go out to various websites and pull down new content, new articles that were published. I don’t recall all the details, and probably never knew them anyway, but I do recall that PointCast went down in a ball of flames, largely because the whole “push” model went down in flames. I was disappointed when the IT director started to block PointCast traffic, and then I realized that it was happening everywhere, and PointCast fell away.

Now of course Plaxo is a much newer service, but in a way, I think the name still carries some “first generation” baggage with it. Plaxo used to be about keeping my address book up to date; it would walk through my contact list and email everyone in there, giving them the option of updating their own information. I liked the idea initially because it pushed the problem out where it belogned … to the owner of the information. You know if your information is up to date, and you can quickly re-enter it for me, thank you.

But soon Plaxo got a bit of a bad reputation. People got sick of receiving the self-updating invitations, and many spam filters started blocking Plaxo traffic. It seemed to many, especially with the upsurge of social networks and free competition from CardScan, that Plaxo would die a slow death, or that it was already dead.

Not so! Plaxo came back a few months ago with a 3.0 beta product that is now central to my life. They have identified out a most difficult problem: synchronization across home and work. So now I have Plaxo running on my MacBook Pro at home, my iMac in my home office, and my Outlook at work. Not only that, but it is connected in wild and wacky ways with my Google GMail account, so now my Google Calendar and Address books are automatically synchronized with my home and work life.

And everything is all good. No longer do I have to wonder whether something I create at home will be sync’d with my work calendar. No longer do I actually have to fire up Outlook or Outlook Web Access to set an appointment from home. I simply enter it anywhere … on my iPhone, on my iMac, on my MacBook Pro, on my Google Calendar, or on my Outlook at work, and it magically appears everywhere else.

It’s missing a few things in my view. For example, its duplicates tool is not good enough to be useful, and I think it needs a sort of audit service. I have 1000 contacts, and I’m sure there have been a few mistakes in sync’ing; I have found some entries that are total nonsense, so I wonder if there may be some bugs. Also, Plaxo does not sync photos from my Mac address book. I know that Outlook doesn’t have photos as an option, but both of my Macs do, and my iPhone does, and I’d like to sync them.

Customer service is also on Plaxo’s radar. I had one inquiry that went well beyond their promised SLA. I emailed their “Customer Advocate” after not getting my response in time, and I got a response pretty quickly.

Notwithstanding these glitches, this is a service that I love. They have overcome their own first generation hurdles and created a new product that solves a big problem for me, and I hope they are successful forever. Amen.