Service Model Thinking for Product Model Folks


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Service Model Thinking for Product Model Folks. Are you a chef or a grocer? By Rich Mironov at SVPMA Monthly Event April 2007

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  • © Rich Mironov, Mironov Consulting, 2007. All rights reserved
  • Grocer says: “Here’s what you ordered!”
  • Chef says “I think you’ll like this combination!” and “How would you like that cooked?”
  • Restaurant must serve many diners, with each getting a pleasant personalized experience. Fixed but extensive menu gives some personal choice (features, options). With applications, need limited range of personalization depending on app. Application preference levels: each user, each customer, supervisory roles, how deep? Availability: must keep restaurant open for posted hours, even if few diners. Nothing worse than coming there, finding doors locked. App hosting: always up except for very limited maint hours. Privacy and security: must protect each user’s data from others and from provider’s employees, may include existence of subscription. (Option for private dining room. Do not see other diners.) Charged for what was ordered/eaten, varies by diner. (Prix fixe is a possibility.) For applications, clear pricing model and back-up details if transaction- or usage-based. Local language, currency, time zone? etc Upset diners never come back. Frustrated users never forget. Allow customers to brand/customize look? Truly helpful online help: licensed software “help files” are generally worthless; online services are held to a higher standard. Human support: all online help eventually fails. Now what? [Alternate analogy: hotels versus sleeping at home. Must provide level of security and privacy to match home, plus services to make visit attractive.]
  • Conceptually, well-designed software applications should be hostable. In practice, companies that don’t plan to host apps soon trade off the many detailed requirements for other features/needs. E.g. multi-level permissions that let a customer’s master-admin see and sub-manage preferences for all users at that company, without seeing any users at other companies. If you are serving a very large customer, this might require 2-3 levels of admin scope.
  • Completely new skill set and operational experience required. Classic software licensing companies don’t even have a department to assign usage costs. Generally requires a new “Operations” group with hosting or IT experience, plus new sets of processes (testing, release, roll-back, incremental update, etc) SLA: Service Level Agreement Analogy: Chef has to correctly cook and serve meat, while grocer depends on customers to safely prepare, serve, decide portions, plan for number of eaters, cost out foods…
  • Compare to your first 5 minutes in a new restaurant: atmosphere, first taste of food, service, noise. Very easy to be turned off on first visit. One bad taste and you’ll never be back. Must be hugely impressive to recommend to friends Now consider visit to survey tools site; search engine; music page; online office supply… most early subscribers to a service are really just trying it out. Ready to cancel within 30-day test period or otherwise run away.
  • Installed base marketing: Read and re-read your privacy policy Be prepared to fix any problems they report iPass example: Must get each end user to install laptop software. “ What can we do to help?”
  • Top responses to AirMagnet newsletters were usually not to specific month’s content. Instead were: how to get upgrades, tech support contact info, upcoming releases, sales contacts for add’l software copies, unsolicited success stories. Reponses to specific items/articles were secondary.
  • Most feedback processes are heavily weighted by the objectives of the reporter. Sometimes difficult to tease out the actual information.
  • Alternative to “seeing if the dogs eat the dog food”
  • © Rich Mironov, Mironov Consulting, 2007. All rights reserved
  • © Rich Mironov, Mironov Consulting, 2007. All rights reserved
  • Service Model Thinking for Product Model Folks

    1. 1. Service-Model Thinkingfor Product-Model Folks: Are you a Grocer or a Chef? Rich Mironov SVPMA, 4 April 07
    2. 2. An Unapologetic Product Guy Consulting mostly to early-stage tech companies  …and big companies needing some start-up energy  Product strategy, market needs, business/service models Repeat offender at start-ups  iPass, Wayfarer, Slam Dunk (VP Mktg), AirMagnet (VP Mktg) Early brand-name experience  HP, Tandem, Sybase  MBA Stanford, BS Physics Yale 2
    3. 3. I’ve Been in Tech So Long…3
    4. 4. …Newsletter on Startups & ProductsThe secret life of Product Managers “Parenting and the Art of Product Management” “Goldilocks Packaging” “Sharks, Pilot Fish, and the Product Food Chain” Recent survey about PMs and service-versus-product 4
    5. 5. Service-Model Thinking Most of us have grown up as “product” product managers Service model: more than just hosting Responsible for user’s positive experience So… are you a Grocer or a Chef? 5
    6. 6. Licensed Enterprise Software…is like delivering groceriesEnterprise IT is responsible for: Choosing the right items Combining them correctly Managing hours and uptime Serving and helping users Producing tasty results 6
    7. 7. Hosted Software-as-a-Service…is like running a restaurant Serving complete meals Many customers Hours and availability End users interact directly Need repeat buyers One bad experience is never forgotten 7
    8. 8. Product & Service ModelsProduct Model  One-time fee or license  With or without maintenanceSubscription Service Model  Monthly fee per userTransaction Service Model  Per fax, per download, per transplant, per report, per hour, per update… 8
    9. 9. Four Key Service-Model LessonsBeing the chef, not the grocer:1. Build a multi-tenant infrastructure2. Expect slower, incremental sales3. Do continuous marketing4. Get real user feedback 9
    10. 10. 1. Multi-Tenant Infrastructure Personalized experience, menu of options “No excuses” availability Privacy and security Usage reporting and billing Helpful written help with human back-up 10
    11. 11. Not a New IdeaWell-designed software should be host-ableBut need to set priority for… Details of user hierarchies Reporting, billing, invoicing Third party data security obligationsSee Luke Hohmann’sBeyond Software Architecture 11
    12. 12. New Kinds of Service MetricsYou need an Operations team and new skill set Uptime SLA (“Application up 99.95% of the time except…”) Response Time (“98% of log-in take <1.5 seconds…”) System Capacity (“Add CPU when usage >60%...”) Support Escalations (“P1 first response within 15 minutes…”) Reporting (“Billing reports showing all customer transactions…”) Software Updates (“Push software weekly at 1AM Sunday with roll-back…”) 12
    13. 13. 2. Incremental Sales CycleInitial subscribers sign up more quickly, but… Easy, cheap trial is #1 benefit of service model Pioneers are really in extended trial First taste must be greatRevenue ramp is slower…upsell to more users…upsell premium features 13
    14. 14. No More Shelfware Purchased but unused software Product model: sell extra licenses now  Get revenue (commission) now  Lock up the customer  Screw future revenue Much harder with service model 14
    15. 15. 3. Continuous Marketing “Drop-and-run” licensing model  Ship CD, recognize revenue, move on New “shared success” service model  We can’t grow your account until you are happy Constant upsell  continuous marketing Touch users early, often and honestly Good news: you have actual user names 15
    16. 16. Frequent, Helpful ContactFriendly, low-pressure tone Topic of the month User profile (success story of the month) New features FAQs Support contacts 16
    17. 17. 4. Getting Real User Feedback Licensing model: second-hand feedback  Customer meetings, third party surveys, sales issues, annual user groups, online forums, industry analysts, product reviews…  What are their agendas? Service model: your own log files  Precise, real-time, unemotional  What features are really being used?  Error reporting 17
    18. 18. 18
    19. 19. Dare to Taste Your Own Food …use your own service if you can19
    20. 20. Take-Aways“Wrapping It All Up” Service model adds new responsibilities and requirements Initial revenue is slower Installed-based marketing never stops You have actual usage dataYou may be asked for a servicemodel soon. Grab your cookbook! 20
    21. 21. Q&A
    22. 22. PM Survey Recap Time permitting… see
    23. 23. 180 Responded to PM SurveyPricing Model Product/license 48% Subscription 23% Transaction 19% Free, advertising, other 10%Job Role Product (service) management 38% Product (service) marketing 12% Corporate marketing 7% R&D, sales, consultant, other 43% 23
    24. 24. Top-Line Observations Products slanted toward enterprises/government  Services have more share of small/medium business Subscription service sales cycles 33% shorter  Transaction services 49% shorter Service PMs make little use of app logs to understand customers  24% vs. 1% for products PMs say that customers use only half of features  Were dramatically overloading our offerings! Service PMs use product registrations more than user profiles to identify users 24
    25. 25. Selling and Upselling 33% faster close cycle for subscriptions Service tilt toward small/medium businessesDifferent upsell models… Product Subscript TransxnSelling new versions/upgrades 76% 46% 38%Selling more units 83% 46% 50%Higher-priced subscriptions 28% 83% 44%Adding more users 47% 68% 29% 25
    26. 26. Understanding Users“We know which features/functions ourcustomers use via...” Product Subscript TransxnPersonal discussions 56% 49% 53%Tech support calls/cases 38% 32% 24%Enhancement requests 27% 17% 11%Transaction/activity logs 1% 24% 21%Sales team feedback 29% 24% 29% 26
    27. 27. Over-Featured Products?“I think my typical customer uses...”Product: 48% of available featuresSubscription: 48% of available featuresTransaction: 52% of available features 27
    28. 28. Thank You! Rich Mironov SVPMA, 4 April 07