4 – How Will We Engage and Delight Our Users?

This is Step 4 of “4 Steps to Develop a Strategy”, focused on finding power users who have already been compelled to find some solution to a need they have. Can we productize some version of it to serve other users while addressing the buyer’s pain point in the same product?

There’s a difference between a strategy and a product definition. This step is not about building a product (that has to be an iterative process with actual users over time), but rather about defining the few pillars of the product that put both a direction and guardrails on your product development.

Why do we need Step 4 at all? Isn’t it enough to have identified a value pool?
Whatever value pool you identify, you should be aware that the market will be flooded with companies claiming to solve it. You can differentiate based on ROI case studies (when you get them) and a focus on a unique root cause … but more valuably, based on a focus on a unique user and a unique way of serving that user. Win over the user and the buyer will follow.

Software as a Service (SaaS) companies are realizing that contract renewals are determined in the first few weeks of deployment: if users are engaged and adopt quickly, renewals two or three years later are already on a strong path.

While delighting your users won’t fully be solved in your strategy, the rough guideline for accomplishing it has to start with the strategy. A focus on the buyer is not enough. We now turn to the user.

(4a) Identify our users. Our buyers are not our users.

My colleagues and I kicked off our most recent startup about 18 months ago. We knew our “buyers” very well, having served Chief Nursing Officers in hospitals for many years. We scoped out and pitched a product to them that we believed would solve one of their most pressing needs, the need to engage and retain their clinical workforce.

We also knew our “users”: nurse managers in those hospitals. We knew that nurse managers had a very difficult role and designed a product approach based on dozens of hours of discussion and feedback with those managers, as any good Lean Startup would do.

We also knew that buyers wouldn’t buy our product if they didn’t truly believe that the users would use it, so there was natural alignment there. But what I have consistently been surprised by in the course of the past months is how different the two stakeholders’ needs are and how difficult it is to be a startup that is trying to thread the needle between them both.

A large number of our product and strategy discussions have been around what to build, how to organize what we are building, and how to message it. In so many discussions, the question has come down to: should we build for (and message to) the buyer or the user? And if we want to balance both, how do we best do it? Which one matters more for sales? For product adoption? For impact?

I don’t profess to have a perfect generalizable solution to the challenge. I simply raise the distinction because realizing that we had multiple stakeholders and part of the magic of our product is to unite them both has helped us.

Terms like “Product-Market Fit” are ubiquitous and are a good example that we often don’t disentangle buyers and users.

In our startup, we evaluate our “Product-Buyer Fit” and “Product-User Fit” separately, for example.

Buyers are not users… even when they’re the same person.
If they are the same person, they are still different stakeholders. Too often, strategists merge buyers and users into “customer” and they lose insight because of it. Buyers and users have different goals and pain points.

For example, how many times have you (as a buyer) bought a plane ticket and chosen the cheapest one? Then weeks later when you (as a user) are waiting in long lines, sitting in a cramped middle seat, and suffering through delays and cancellations… and cursing the earlier version of yourself for being such a cheapskate?

When you are serving the user, delight them with what they care about (e.g. how easy your product is to use); that’s a great way to have them buy from you again. But don’t distract the buyer with messages about what only the user values.

(4b) Determine the two to five unique and pivotal decisions that will define our solution—and will delight our users

Our chosen method for addressing the value pool is only the start. Here we need to weave in the user. How can we delight them while impacting the buyer’s value pool? How will we create raving fans?

These have to be directly connected to our sources of advantage as well. In Southwest Airlines’ case study, for example, their value pool and source of advantage focused them on serving short distance travelers from smaller, more suburban airports. Therefore, it would have been out of synch for them to choose first-class dining or multiple business class seating hierarchies in how they served their user. From their value pool and source of advantage, you can clearly draw a direct path to being a lower cost and more agile company across the board.

Our goal is to develop the two to five unique and pivotal decisions that define our solution. Determining what they are is perhaps the hardest part of developing a strategy. Often, when starting on a new product, you don’t know, because it requires a working knowledge of the user and what they value. But it’s important to build a perspective and evolve it.

These decisions will allow us to best serve our chosen buyers and users, leverage our sources of advantage, and align us with the larger trends.

These decisions should be internally consistent and mutually-reinforcing.
For example, with a company I was a part of, we believed that generating insights from a particular data source would be one of the core product attributes that would define our solution. Over time, we discovered that component of our product wasn’t as important to our users—so we demoted it and promoted other decisions. So, while all Four Steps of a strategy are connected and will evolve, this section needs a strawman that gets re-evaluated often, especially in the early days.

Interviews are still a valuable tool
We need to talk to potential users about what product would be valuable for them, centered on the chosen method. Resist the urge to jump into a specific product solution. And resist the urge to frame the problem in terms of the buyers. If we go to nurses and say, “your CEO wants to accomplish this and here’s a product we’re working on that can help do that”, the odds are they will say, “Great! Another thing for me to do that’s pushed on me by the administration! Don’t they understand how busy I am and how I have no time to do every new thing they come up with?”

What you have to do is talk to the users about their needs and areas of friction and build your product and story to them around where they are.

You need to accomplish a job the user is already trying to solve
Let me be clear: no user will use your product unless it helps them solve a problem or accomplish a critical job they are trying to solve (even if it solves a buyer’s problem and the buyer is their boss). To get product usage, you need a user’s internal triggers to fire and then you want to be the reaction they have to that trigger firing. You cannot create usage by giving people a product and saying it does something new that they are not trying to do. Amazon on a cellphone does this for many people: whenever they think they need to buy something, it’s easier to open their phone and buy it than it is to write it down on a shopping list and buy it later in a store. The internal trigger fires and Amazon is the brain’s go to response.

Don’t build two loosely joined products here—one that solves the buyer’s need and another for the user. Focus on doing one thing well. The magic is threading the needle between the users’ and the buyers’ needs.

Find the “power users” out there and ask them what solutions they have cobbled together for themselves. Then productize that.
Power users are the most forward-thinking of your user base. They are often the most tech savvy, may have multiple cross-disciplinary degrees, and/or may have worked in another industry. Use LinkedIn to find people who meet that profile and interview them.

Look at what they’ve built themselves. If users have a real need, they’re not going to sit still while waiting for someone else to solve it.

The odds are that users are not immediately solving a problem aligned with a buyers’ value pool. But aligning them to win over both in a single product is where you should focus your efforts.

Find the smallest prototype of the product/solution that will fit both buyer and users’ needs
This is often called the “Minimal Viable Product” (MVP) in the lean startup vernacular. I prefer the term “prototype”; MVP includes the word “product” which already plants the idea that it has to be something real. Prototype, on the other hand, conjures the right image for me: something duct-taped together in an afternoon. It doesn’t matter how rudimentary or unscalable it is. Its goal is to help you learn about what your buyers and users need and want.

If yours is an analytics company, could you imagine some early, viable version of the solution being built in Microsoft Excel? You might not actually build it that way, but if you can imagine it, you can then imagine how you could build a working version of your product in six months. On the flip side, do you need massive data to get started, which you don’t have? Or do you need to invent something that doesn’t exist today just to get started? If the latter, that would be a warning flag for me.

. . .

This article is an abridged chapter from a book of mine, 4 Steps to Develop a Strategy

All books and other resources referenced in this article

3 – Why Us? Why Can’t Two Kids in a Dorm Room Build This?

This is Step 3 of “4 Steps to Develop a Strategy”, focused on understanding why we’re the company or team that can uniquely solve the buyer’s pain point. In short, we need an ironclad answer to, “Why can’t two kids in a dorm room build this? What are our super-powers?”

(3a) List out the unique assets + expertise we have that makes us the best team to implement this new method of unlocking our chosen value pool (i.e. our sources of advantage)

What do we as a team do uniquely well? What skills, knowledge, or insights must we really leverage if we will give ourselves the best chance of building something great? What are our “super-powers”?
At the early stage of identifying a problem to solve and building a product, you may not have a specific solution in mind. Nonetheless, you should at least have some idea of the core competencies you can bring to any problem and be able to articulate why those competencies will be the cornerstone of a viable solution.

What are the technical insights or tools we have built (or see a clear path to build) that are beyond what others are seeing today? Can we inject them into the solution for a value pool?

What will allow us to help our customers accomplish something 2-, 3-, 5-, or 10-times faster, cheaper, or better than they otherwise could?

What are the insights we have about what creates value for our users and buyers that others are not adhering to? For example, in my current company, a relentless focus on teeing up specific actions for users to take versus just showing them data in a dashboard was such a source of advantage for us that we rallied around it constantly. It defined us and our product. It was an insight that, when built into the culture of the company, became a consistent source of advantage.

In one of my prior companies, we built an e-learning platform for doctors and nurses. We had illustrators, learning designers, engineers, clinicians, copywriters, assessment question writers, statisticians, and many others who worked together to create hard-hitting content. That collection of individuals, working within a process that we had developed over the prior years was a definite source of advantage. Our competitors may have been able to mimic some of our outputs but it would have taken years for them to recreate the engine we had put together.

Why can’t two kids in a dorm room do this? What are our sources of advantage?
You need to have a good answer to the question of why you are uniquely situated to build the solution. Because if that answer isn’t strong, you’re probably underestimating the challenges.

Know your strengths and play to them. Generally speaking, for example, 35-year-old corporate executives don’t break into professional baseball.

The same is true of a startup. If you can’t articulate and quantify why you are uniquely the right set of people to tackle a particular problem, then you should at least ask yourself why hasn’t somebody else solved it?

What privileged information do you have about your buyers and their needs? What do you know about your users and how they experience the world? Do you have a unique technology?

As a new company, consider what personal strengths the founding team has, such as industry knowledge, an ability to operate with high mobility (i.e. fast-product-feedback-loops), analytics horsepower, unique customer insights, sales connections into the customer base, or access to founding capital. Compare these to strengths a startup most likely doesn’t have, though incumbent competitors often do: strong brand recognition, at-scale engineering and marketing teams, distribution relationships, and global scale such as in hiring employees and buying supplies.

Strategic jiujitsu: Lessons from Southwest Airlines
Can you create a source of advantage by inverting what appears to be a barrier to entry?

Southwest Airlines gives us a great case study here. In the 1970s, all the incumbent major airlines had purchased the rights to the gates of the major airports, thus preventing new airlines from flying out of them.

Conceivably, anyone could buy planes and hire grounds crew, but there were no gates available to dock those planes at the major airports. However, this approach had also caused those incumbent airlines to abandon gates at smaller airports. By buying the rights to those gates, Southwest was able to overcome a major barrier to entry and then leveraged the positive aspect of those assets (e.g. faster gate turnaround time) to build a unique solution. How’s that for some strategic jiujitsu?

(3b) Identify the trends in the macro environment that our method can tap into

No one can predict the future and no strategy should require you to do so. Your strategy should hold strong as the future unfolds in unexpected ways.
While surprises can appear, there are always macro trends that move slowly and if you’re tapping into them, your odds of success are much higher.
Likewise, your odds of becoming extinct are high if you are fighting against these trends.

Cisco is a great example. To understand its enormous success in the 1990s, we need to observe the trends it was fortunate to ride. Cisco started by creating super-fast routers that build clever code into the chips in its router. None of the other players could replicate it because it codified the skill of its nimble team of experts into software. Riding this first trend of hardware to software allowed Cisco to overcome the size advantages of IBM and AT&T.

Cisco was well-placed for the rise of corporate networks when companies went on major spending sprees to implement internet connectivity in their buildings. And then they positioned themselves a few years later for the public internet when it created a similar need for networks in people’s houses.

McKinsey’s research shows that about 40% of a company’s success, on average, is determined solely by the industry that it is in.

. . .

This article is an abridged chapter from a book of mine, 4 Steps to Develop a Strategy

All books and other resources referenced in this article

2 – What’s Our Unique Approach to Unlock the Value Pool?

This is Step 2 of “4 Steps to Develop a Strategy”, focused on identifying the root causes of a buyer’s pain point, determining why it hasn’t been solved already, and outlining our approach/technology to do so.

(2a) List out all the root causes of the high $ value pool

This step typically follows Step 1 (the process of identifying a buyer and value pool).

This step should not be super difficult. Ideally there are many publications on the top drivers of the pain point we can reference and by citing them, everyone will nod their heads in agreement. Be concerned if it’s too difficult; while we should do our own research into the root causes of the value pool we identify, we don’t want to have to spend time in a sales meeting educating our potential customers about this.

Interviews again are a valuable tool
At one point in my career, I investigated building a product that would help reduce patient falls in a hospital. I decided not to pursue it and partly for that reason, it makes a good case study.

For Step 1, I talked to buyers about how they measure the cost of falls and how much value they see in a further reduction. I also asked them the mechanisms they have seen effective for fall reduction and which ones they use, or are considering using, today.

I talked to the prospective users of such a solution—in this example, physicians, nurses, and nurse assistants. In my experience, offering people a gift card for thirty minutes of their time for an expert interview will allow you to hear the voice from the front lines—and it is always well worth it. In any case, I asked nurses what the root cause of patient falls were.

At this point, our team began to imagine solutions based on what we learned about the main cause of falls (e.g. elderly people getting up to go to the bathroom) and how they were currently prevented (e.g. checking in on patients regularly). One solution the team came up with was an alert for the nurse when the patients’ weight is no longer present on their bed.
Note we’re not looking to invent a product here, but rather to identify a solution approach (also known as a product strategy or value proposition) that a product could be built around. In this example, a scale under the bed could be a solution, but not a “product” yet. We don’t know what the users’ needs are and so we don’t know yet what product features would be needed to have them use it.

I’ve also done surveys. In this case, surveying 300 nurses to find out the root causes they see in patient falls would tell us a lot. The result of that work would be something we can deploy as part of our marketing materials later on. All you need are an email list and the ability to offer a $15 Amazon gift card for a few minutes of their time. You may find it best to do your research first so you can ask meaningful, informed, and hypothesis-driven questions in a survey.

(2b) Determine why the value pool isn’t being solved today: Are there major root causes not being addressed? Or are current approaches just not effective?

The value of finding unaddressed root causes
This is where you look for Blue Ocean—value pool solution approaches that don’t exist today. Other companies may know the value pools (as discussed in Step #1), but the current competitors are likely focusing in on solving one or two of the root causes and solutions to the value pool. Are there any root causes that are being overlooked today? If so, coupled with a unique product approach, this is where you can do something different and impact your customers’ value pools in a way that’s complementary to what they’re already doing.

Strategy at its core is carving out divergent solutions and approaches. Ivan M. Arreguín-Toft’s analysis in “How the Weak Win Wars” shows that taking a divergent strategy allows the smaller player to win two-thirds of the time. But taking a strategy similar to an incumbent’s wins only one-fifth of the time.

There are three ways to be different: choosing an over-looked buyer, choosing a value pool / pain point for that customer that no one else has noticed, and, finally, choosing a novel approach to solve that pain point.
What root causes have others overlooked so far? They are often in plain sight

(2c) Choose a method of unlocking the value pool—ideally one that’s based on a unique technology or insight
If there are many competitors already providing solutions to the buyer’s need/value pool similar to the one you are considering, you have to have a strong belief you can build yours uniquely enough to win a certain customer segment. Don’t immediately worry about competitors: having competitors is validation of the need you identified. Instead focus on differentiating against those competitors.

Where there are existing players, opportunities can still be attractive if you can avoid becoming a commodity. In the chart below, you can see the relative attractiveness of a strategy based on the differentiation to incumbents in (1) choosing a buyer/value pool and (2) a method of unlocking that value pool.

For (2), if there are many competitors or in-house solutions addressing a value pool, but doing so in dissimilar ways as your solution, you can still be successful. I’ll warn you that potential buyers may react with “well, we’re already doing so much in this area, let’s see how those initiatives do before we start up a new one.”

What is the unique technology or analytics/data that you are bringing to the solution? If you don’t have a clear answer, why wasn’t your solution already built years ago by someone else? The unique technology or analytical core should become a source of advantage that will deter copycats and enable you to find a unique voice in a crowded field of competitors. More on that in the next section.

. . .

This article is an abridged chapter from a book of mine, 4 Steps to Develop a Strategy

All books and other resources referenced in this article

1 – What’s a High $ Pain Point that Keeps Someone Awake at Night?

This is Step 1 of “4 Steps to Develop a Strategy”, focused on identifying a buyer and a value pool/pain point.

(1a) Identify a buyer

Anchor on a customer (or start with a few and aim to narrow them down to one). Whom would you be selling to? What organizations do they work for?

For example, your customer can be the marketing departments of large corporations (as it is for Facebook and Google), COOs of hospitals (as it is for manufacturers of operating room beds), or busy professionals (as it is for Blue Apron). The best customers are ones you and your founding team know well. My personal experience is that later, when you’re building a product, raising money, and selling a product, there’s so much less risk if you can say “I’ve been serving this customer for over ten years and I personally know their opportunities and challenges.”

(1b) Identify a high $ value pool

What’s the pain point (or untapped opportunity) for the buyer? How big is the $?
The next step is to identify the areas of highest cost savings or revenue growth potential for that customer; often these are well-known.

A value pool is the $ amount representing how much you and your buyers expect your product to alleviate a major cost driver or open a new revenue opportunity for a customer. Ideally, it is one of the top five items on a C-level leader’s mind. Finding a large $ value pool is important. Investors have a saying that the success rate of companies is the same whether they go after a big market or a small one, so invest in those that go after big ones. I use the term “value pools” and not “markets” because product strategy focuses on building new solutions; the term “market” implies that many competing solutions already exist, which may not be the case.

The best value pools are ones which buyers are already measuring and reviewing every month. Examples for businesses may include metrics such as too many hours spent doing X, too high of a product return rate, too high of a customer churn rate, or too few sales leads.

Who on the CEO’s team is accountable for the value pool? If it’s an area that’s measured today but no one is personally held accountable for it, you may find the lack of a buyer who will clamor for your solution. One such example could be employee turnover. Is the VP of HR on the hook? Or are the individual managers? Or is no one? It may vary depending on how the CEO allocates accountability.

Second best are the value pools which are abstract, noisier, infrequently reported, or harder to measure. For these value pools, it can be hard to know if a solution deployed against them is having an impact at ninety days, or even a year in. Examples of these more abstract categories might include: doctors not being prepared enough for rare medical events, employee happiness and morale being too low, and customers not being aware of a buyer’s product. These may keep a C-level leader up at night… but how are they measured and how can we prove that our product will generate an improvement on them over time?

Will the value pool grow and persist?
Is the value pool likely to remain unsolved five years from now? Is there a time limit like the fixes for Y2K had? Is there an obvious solution that everyone will have implemented soon?

The question of how the value pool will change (i.e. Grow? Shrink? Persist?) is often overlooked. It’s harder to get an insight into, but interviews with forward-thinking buyers should illuminate the most likely trends. For example, TiVo was a company in the early 2000s. It allowed cable and satellite TV viewers to pause, delay, or record TV shows that were live-streamed for later on-demand viewing. The customer need was that people wanted to watch content when they wanted to, not when TV stations broadcast it. But the massive trend was in content becoming internet-based and on-demand. That trend removed this value pool and there was no obvious replacement that TiVo could pivot into.

I was talking to someone at a kid’s birthday party recently and shared the criteria above. I realized it was a lot to remember so I said I should get it printed on a bumper sticker to help. I decided against it, but I tested out what it might look like.

. . .

This article is an abridged chapter from a book of mine, 4 Steps to Develop a Strategy

All books and other resources referenced in this article

What is Strategy?

After many years as a software engineer, I went back to school for a couple of years to get an MBA, and then joined the consulting firm McKinsey & Company. It was there that I got my real education in business building, problem-solving, executive communications, and, perhaps most of all, strategy.

McKinsey for me was a masters’ class in corporate strategy from some of the world’s most experienced and thoughtful practitioners of it. In my later years at the firm, I helped form an analytics-based startup there and then left to pursue a series of my own startups.

What I learned from my experience in an international strategic consulting role helped me tremendously in all of these later ventures, but I also recognized that the fundamentals of strategy had to be reinterpreted a bit to apply to a high-tech/analytics-based SaaS B2B startup. The core elements of a good strategy as it applies to a Fortune 500 executive team are fundamentally the same as those for a startup, but for a smaller company, strategy needs to provide a path from a blank sheet of paper to a profit-generating product—as opposed to getting the most out of existing products.

In other words, what I’ve come to realize is that there are two types of strategy.

There are two types of strategy

“Product strategy” is the process of creating and sustaining a new value-creating product
A “product strategy” captures how and where the product will grow, whether for a startup or a hundred-year old brand.

Product strategy is a simple coherent answer to the classic questions: Who is the buyer? What is their need? What is stopping the buyer from solving that need? What unique assets and skills will we bring to solve it? And how will we delight the end user?

In a startup, this is done by the founding team, the company’s strategy lead, and/or the lead engineers/product designers.

“Portfolio strategy” is the high-level process of managing multiple products
For an established company with one or more existing products, “corporate portfolio strategy” builds on top of product strategy.

Innovation and product strategy form one lever you can pull to grow and cultivate new seedlings.

The five other levers within portfolio strategy include the constant re-allocation of resources to growth areas, active M&A/divestitures, doubling down on capital investment, continuous productivity improvements, and brand differentiation.

Active acquisitions can be a great mechanism for an established company to stay innovative. It’s a way to keep the CEO in front of new ideas and to avoid a corporate mentality that all the answers they need exist within their own four walls.

In established companies, this type of strategy is typically done by a Chief Strategy Officer or leader of business development; these are roles which, in my experience, are often more focused on M&A than on product strategy and innovation.

Portfolio strategy can be considered a “strategy of strategies”. It should answer: What do we create uniquely well? What are we known for by our customers? What are the different ways we deliver what we do uniquely well (e.g. what are our products)? Which ones are the most promising and thus deserve the most resources? How do our products interoperate, cross-sell, and contribute new value to each other?

For example, Disney’s unique skill is creating animated characters (e.g. Cinderella, the Little Mermaid, or Buzz Lightyear) and stories that can be easily ported over to other products such as theme parks, books, comics, and cruise ships. Apple’s unique skill is creating well-designed, mutually-integrated, and easy-to-use products with a similar consistent interface across computers, music devices, and phones. My prior company’s unique skill was creating tests and e-learning content for clinicians, which we ported into pre-hire assessments, onboarding programs, and personalized professional education.

There are two level that strategy can operate in, but, in either case, the goal of strategy is to define how you are going to create unique value for customers.

Product strategy, in particular, declares how we will solve a specific need in a unique way
A strategy identifies a buyer, their need/value pool, our chosen mechanism for addressing that need and why it will be effective, the unique skills/assets/capabilities we have, and how all those things will come together to uniquely serve the buyers’ needs while delighting our users.

Good strategies also …

  • Focus us on the few big decisions (many made before serving a first customer) where our collective effort will be multiplied to create the most unique customer value.
  • Force us to zero-in on a particular buyer, their needs, and the tradeoffs inherent in building a specific solution to them, and therefore makes it clear that there are many customers and initiatives we will not pursue.
  • Highlight the challenges we face and demands real problem-solving power to help overcome them.
  • Show how we will build fast-product-feedback-loops (“learning loops”) into the product to continually learn and increase the tempo of value creation for our customers.
  • Are simple to understand. There are cohesive, coherent, focused, attainable, and clear. They have the outline of real steps we need to take. Anyone in the company can understand them, remember them, explain them in their own words, and apply them to their decisions on a day-to-day basis.

 
By choosing how to uniquely serve your chosen customers, you are forcing tradeoffs. Aldi (related to Trader Joe’s) chooses low prices as its primary mechanism for creating value for its customers. To do that, it has a much lower selection of products (2,000 items compared to 15,000 that many grocery stores have), among other no-frills decisions. What if customers want more choices? That’s fine—Aldi is happy to have them go somewhere else. It is instead focused on serving the customers whose needs match their value proposition.

Some decisions and tradeoffs have to be committed to and locked in early on. But ideas that can be tested without irreversible investments should be. Your strategy should still declare the good faith intent to those areas but only with a small investment. Keep your options open for a commitment once you’ve learned more and reduced the risk.

Strategy is also the path by which a company survives evolution

[The aim of strategy is] to improve our ability to shape and adapt to unfolding circumstances, so that we … can survive on our own terms.

— Col. John Boyd, the pre-eminent military strategist of the 20th century

The nice addition that Boyd makes with the line “survive on our own terms” is connecting strategy to evolution. Boyd was a student of the sciences and believed that organizations, like organisms, move through cycles, interacting with their environments by learning, adapting, and aiming to survive.

In short, if you win, it is in part because of your speed, focus, flexibility, and agility. Arguably these are more about culture and tactics than strategy—but your strategy should enable and set the groundwork for your ability to shape, adapt, and evolve.

. . .

All books and other resources referenced in this article