"Obligate ram ventilators" are sharks that have lost the ability, and the necessary anatomy, for buccal pumping, and instead can only respire using ram ventilation. Sharks from this group (which includes great white, mako and whale sharks) would indeed die from lack of oxygen if they stopped swimming."
Product-driven companies are just the aforementioned obligate ram ventilators sharks, would inevitably die whence they stop reinventing and innovating. One of the more popular concepts for reinvention is aptly described by McKinsey's 3 Horizons Model (see my other post). It goes without saying that companies must generate much as possible revenue from the existing product lines to support future innovations. Observations raised in the previous post can help us to answer a question of how we, as technologists, can take a full advantage of consumers’ unyielding quest to increase their previous level of consumption. In other words, what can we to maximize current product upgrade revenue stream? In this post I am not concerned with creating a completely new product or category. So let’s discuss the art of an Upgrade.
As have stated in my previous post, a single-minded focus on an unyielding flow of features is not enough to build and is not sustainable. Companies has to do much more than just mindlessly pump new features to generate a sufficient level of excitement for consumers to keep the upgrade cycle uninterrupted and robust. There is no way that in a one short blog I can fully discuss and define this extremely complicated, multi-faceted and fascinating topic. I will, however, attempt to share my perspective on how we can best direct and affect consumer’s decision to upgrade. To start, let’s define the terms. What is a Product? What is a New Product? What is an Upgrade? I don’t claim a canonical acceptance of my definitions, but am laying them down to avoid an ambiguity of presenting an upgrade framework concept below.
A Product (or Service) is composed of Product Core Capabilities, well-defined Real or Perceived Benefits, Customer Experience, Stickiness factors and a Total Cost of Ownership.
I am sure that there may be better or more extensive definitions. Note, that I’ve omitted a few important factors, such as a method of product consumption, or it’s resell value. That is because, at a macro-level, the five categories I’ve defined above can logically absorb these subcategories, and aptly describe any product. So, I am happy with my definition.
Ok, what is then a New Product version? The following Venn diagram defines it as an intersection of Product Capabilities/Factors: Existing + New – Obsoleted. Yes, a New Product is not a super-set of the Old Product – it likely, and by design, lacks certain capabilities offered in the older version. The trick for us is to figure our what to keep, what to cut, and what new to develop.
For me, the best way to illustrate a concept is to visualize. The diagram here is my attempt to relay the key concepts of the Upgrade Framework that sways customer along the upgrade path. The concept is non-linear and so profoundly complicated that it is more art than science. There is no formula, no silver bullet. But, just like with an inheritance classes of OOP, there are well-recognized patterns, shortcuts and standard approaches that we can invoke to gain higher upgrade certainty.
On the left side of the diagram, we find characteristics of an existing Product or Service (Old Product). Any old product delivers a Real or Perceived set of Core and Non-Core Benefits that diminish over time. That’s why it matters immensely where we are along the Product Maturity Curve. We must have a clear understanding of the Old Product value proposition and positioning, for an unknown starting point is going to skew all future outcomes. The model below incorporates Kano model principles and selectively applies investment criteria, and development efforts. The goal is here is to emphasize some or de-emphasized other Positive Upgrade Triggers that create, through stimulation of left or right side of consumers’ brain, an undeniable impulse to upgrade. Since an upgrade decision, almost always, is a results of more than one of factors, we need a framework to create the right mix of Positive Upgrade Triggers. That combination is heavily dependent on the Product Lifecycles stage, presence and activity of competition, market dynamics, product category, price, cost, company brand position, and many, many other factors.
To create a right mix of the Positive Upgrade Triggers we need an Upgrade Nursery. This is where we Identify, Analyze, Select, Build, Release and Deploy our combination of Positive Triggers with a mindset of creating a right combination of them to make a compelling case for as many as possible consumers to upgrade their old products. Once again, an application of the proposed model requires us to understand our products well. Product Owner must clearly understand and quantify core and non-core benefits and be able to answer the following questions: What is the extensibility of its use? What are the unique benefits inherent to our product? We must distinguish between a feature and a benefit. For example, a cordless drill delivers a primary benefit of making a hole in the wall (being a drill), a secondary benefit that provides a speed and unobstructed freedom of reach (being cordless), an extended (non-core) benefit of screwing or unscrewing (being an electrical a screwdriver), unique benefit of reusing same battery across our power-tools product line (a platform play, presenting barriers to entry) and delight feature such as customizable torque dial.
We also need to be concerned with experiences that arise from the Product Usage. These experiences have to be measured. Very few product managers have developed, moreover are monitoring, metrics for Dependability, Consistency and Customer Satisfaction. The criticality of Product or Services Experience factors cannot be underestimated nor neglected, but it is such an interesting and complicated topic that it deserves its own post. All core product capabilities come at a cost. Therefore, we need to be acutely cognizant of Total Cost or Ownership – Cost of Maintenance, Purchase, Finance charges, and Resale value. Finally, user investment in our platform or service creates an effect of Stickiness that mostly works in our favor, and presents an incredible leverage to be used at every possible opportunity. A perfect example is an Apple’s ecosystem.
Moving along from the Old Product pane to the right side of the diagram, we find various paths to Upgrade Nursery. Each of the key areas in the Upgrade Nursery deserves its own discussion. It is outside of scope of this post to delve into the details for each of the decision and development branches. I hope that the diagram concisely presents an interplay and co-dependence between the key upgrade concepts in the Upgrade Nursery and its outputted Positive Upgrade Triggers. Our product development investments should be dictated by an objective to create a right combination of Positive Triggers in the Upgrade Nursery to foster emotional and rational impulses to upgrade. As I’ve mentioned prior, the relative weights of each of these investment factors is dictated by product lifecycle maturity, competitive action, customer perception, market trends, macro-economics, product type – conspicuous or inconspicuous, stickiness, etc.
I have split the core factors in the Upgrade Nursery into 5 key categories: Psychological, Core Product Enhancements, Quality and Performance, Operational Improvements, Barriers to Switchover. On the left I’ve depicted Kano investment decision as inputs to Upgrade Nursery. Each category is composed of crucial Upgrade Factors that create Positive Upgrade Triggers, that subsequently amplify the desired upgrade signals. The Upgrade Nursery categories are distinct but interdependent on others, they have a role to play in generating rational or emotional upgrade signals.
Our investment in Psychological triggers, enable customers to gain Social Acceptance from people they care about, or excluding people they don’t want to be associated with. This is very tribal - we can join a tribe of iOS or Android, BMW or Ford, and be totally passionate and less rational about it. Keep in mind that Exclusivity is the flip-side of Social Acceptance. The goal-standard here is to create a product so cool and trend-setting that it is “a must-have”. Don’t mistake this with making a luxury product - I am referring more to iPhone than Vertu. A Passionate customer provides a measure (NPS) of how successful we are in our product planning and delivery. Passion works like a credit that customer gives us, and we must be careful not to, ever, take it for granted. To sustain it we need to continuously delight customers with regular face-lifts, usability improvements and service enhancements. Augment your genuine roadmap deliverables with marketing messages intended to raise curiosity, spread FUD against competitors, appeal to customers’ vanity. For the Conspicuous consumption group, we focus on external factors to maintain the exclusivity and prestige of the product. For the Inconspicuous group, we emphasize factors that make customers “feel-good” about the product. Among these are social responsibility initiatives, locally-manufactured products, non-controversial charitable contributions from sales, etc.
The goal of our activities in the Core Product Enhancements box is to generate rational upgrade signals supported by a meaningful steam of features that resonates with customers’ expectations. The upgrade roadmap is composed of customer feature requests, features to close on competitive gaps, unique features introduced to distinguish our product, and to create barriers to switch-over. Externally, our roadmap can include interoperability features to strengthen Product or Service ecosystem. The roadmap can also include features we need to deprecate from the core product.
Apparently, Quality and Performance category improvements are some of the most expensive to make and they need to be carefully balanced-out in our delivery roadmap. We should heavily invest here whenever our performance KPIs are essentially subpar to that of competitors. Typically, as product matures or whenever we lack ingenuity or vision to create new core product features, we invest here to maintain our delivery rate of “perceived benefits.” The name of the game here is to appeal to the rational part of customer’s brain, to increase confidence in the product, to improve usability and operational stability.
The focus of activities in the Operational Improvement box is to continuously drive down cost/feature ratio. There are different paths to achieving this. I’ve listed few of the approaches that I am acutely familiar with, the ones I am utilizing now, and that served me well in the past. Among them are Cloud Migration, Outsourcing, CICD, Relentless Automation and elimination of non-productive manual labor processes. Some of the companies may choose to complete along the Operational Excellence axis and for them this box is of crucial importance. For other companies, specifically the ones focused on Product or Customer Service axis, the investment focus comes further along the product maturity curve.
Finally, right from the initial product sketches, we need to continuously erect and strengthen Barriers to Switch-over built into the product core and product experiences. This has to be done in an elegant, unobtrusive way, so to avoid creating an overly closed ecosystem or a solely proprietary product. We can achieve this goal through a selective support of industry standards, offering seamless backward compatibility, product extensibility and rich interoperability that spawns an ecosystem of product augmenters. Some of best payback to our investment dollars is to enable a continuous and an intuitive Personalization and Customization. This, besides creating effective stickiness, creates emotional attachment, and amplifies passion quotient. In other words, we at every opportunity, we must deepen customer’s Investment (per Hook Model), to significantly enhance the likelihood that whenever, inevitably, customer upgrades, it will be to our product. We help this decision by providing seamless configuration compatibility, ecosystem interoperability, service, and billing reporting. A huge untapped area is an introduction of contextual behavior features, built and developed through Machine Learning of prior product usage.
Developing of a Positive Upgrade Triggers Mix
As we are planning an upgrade, we’re competing against the two factors: competitors new offerings and “old” product benefits. Therefore, the goal of all of the activities described above is to create upgrade signals that are much stronger those emitted by competitors’ offerings and that overshadow the benefits provided by customer’s existing products. These signals or, Positive Upgrade Triggers, of various strengths and appeal, rationally or emotionally directly affect customers’ decision to drop a perfectly usable, or sometimes deliberately made obsolete product, and upgrade. The upgrade value varies from a newer, shinier version of basically the same product, to a marginally different product, to a drastically different product. As pictured in the diagram, depending on the product category, our rate of innovation, and product lifecycle stage, we need to intelligently create a mashup of the positive upgrade triggers, of various contribution degree.
As we’re moving along the product lifecycle curve, the core product features play a distinctly different role. In the product’s early life stages, particularly when creating a new product category, the core product feature set is a king. But we cannot continuously rely on a stream of game-changing features. Sooner or later, we will have to incrementally innovate in all 5 boxes: Psychological, Core Product Enhancements, Quality and Performance, Operational, all simultaneously creating Barriers to Switchover. Over time, the nature of Core Product enhancements becomes trifling, as we are pulling more focus on reliability, consistency, cost of ownership, service and consistency of experience, and other non-core product features. It is not that I am advocating a non-product approach, far from it. But, as our product matures, the dominance of feature-driven roadmaps is difficult to sustain as their development becomes more expensive and features themselves are becoming less impactful. Genuine breakthroughs are hard to come by, and they often face inherent challenges such as brand erosion, and product cannibalization. Besides, people capable of genuine product innovation are fickle and rare, they are very expensive and are susceptible to attrition, once a rate of genuine innovations slows. Moreover, people who are capable of continuous genuine innovation are unicorns. Still, the situation is not dire for product managers. There are tricks that we can pull, such as: “Competitor Match”, Feature Requests from the field that feeds most of product maps for mature products, incremental usability improvement, improving performance and capacity, and look-and-feel changes. To avoid being leapfrogged by competitors, astute product owners continuously improve core feature set, carefully scan competitive landscape, reacting immediately to all foreseeable threats. Yes, the risk of product bloat is real, but perhaps a higher risk exists when a customer is buying based on a laundry list of features and your feature list is dwarfed by a competitor – your product will be penalized by the market. Keep in mind that there has to be a balance, as feature bloat often results in convoluted value proposition, confusing customer experience, degraded performance and product stability, unnecessary complexity, elevate cost of maintenance, and many other downsides. It is an extremely interesting topic that deserves its own discussion.
As our product matures, we should be naturally focus on “delighters” and avoid spending too much time building performance or baseline functionality features. According to Kano model, these linear or baseline features will be soon populated by yesterday’s “delighters” anyway. The yardstick here is competitor and existing product specifications. E.g. build a bigger screen - instead 4” build a 4.5”, add new color - we had black and white, now add ruby red, design a sleeker form factor - instead of drop-down build a ribbon interface, introduce new service - Buy Online Pick Up in Store, etc.
Real or Perceived Product benefits means little if we cannot demonstrate best-in-class or significantly better than previous version of improved Product Value Perception. It doesn’t not necessarily results in the cheapest price or decrease in price for the comparable “old” product, but it should either deliver a continuous improvement in the Total Cost of Ownership(TCO) or continuous decrease of cost per feature.
Although it is neigh to impossible to capture all the permutations of possible Positive Upgrade Triggers’ signal strengths, but the overriding goal is to create 3 major impulses that influence target addressable market:
1. clear and convincing Unique Value Proposition
2. reduced perception of the Cost of Upgrade
3. increase scope and frequency of the Rate of Innovation.
I believe that these factors will generate a sufficient interest, emotional attachment, rational justification and excitement to nudge a customer along the upgrade path.
The Sledgehammer or Fear of Obsolescence
Nobody is forcing anyone to upgrade, people are just flocking through natural lifecycle, or are simply being persuaded to the latest gadget by an effective marketing campaign. True, to a point. But not completely true. To help the “stubborn“ laggards reaching out their wallets, built-in Forced Obsolescence not to be overlooked. Apps will not work on the old platform, accessories that are no longer compatible with new interface ports, degraded interoperability with other ecosystem services, background memory hungry processes that do not run smoothly on old HW platforms. For inexpensive products with a limited time span, introduce a recurring or built-in obsolescence so that it is cheaper for consumer to replace than to repair. Be careful though, as this is a dangerous game! It always leads to commoditization and, if abused, will lead to customer’s dissatisfaction. Besides, how can you be certain that customer will not switchover to your competitor if you overplay your hand? This game is best played when you are a monopoly or pretty much an 800 lbs market-share gorilla or have moved so far along the product version that the cost of support of the old products justifies their end-of-life. That is why this is a Sledgehammer.
Additional Points to Consider:
1. Only satisfied customer will ever upgrade. Pay attention to your baseline features and transition from delighters to baseline features.
2. Consider every opportunity move your customer away from “upgrade” to “subscription” model. The differences between these models are profound and more and more forward-thinking companies are moving towards it – Microsoft, Adobe, Apple, to name a few.
Conclusion
Keep in mind an upgrade frame of reference, it is most important to realize the progress against the consumer’s previous state of consumption. This realization is real and perceived, rational and emotional. I’d say the biases are that the value proposition has to be more real than perceived, but more consumer’s decision should be more emotional than rational. I’ve described various drivers at our disposition to create a desire and a need for an upgrade. The art and the science of a product upgrade path is to find the right combination of Positive Upgrade Triggers. The end results of our efforts is a set of Positive Upgrade Triggers that create convincing impulses to upgrade. A mix of these impulses affect the three fundamental factors affecting consumer’s decision to upgrade are Perceived Unique Value Proposition, Cost of Upgrade and Ownership, and Rate of Innovation. These create a fondue of emotional excitement and rational justifications that yield a positive upgrade path vector.
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