When defining your organisation’s strategy, do you usually use a product or customer strategy?
What’s the difference?
One can say that using a product or service-based approach is inside-out thinking – I have a product or a service, and I need to find customers for whom this product or service will be valuable. Using a customer or market-based approach to strategy is outside-in thinking. There are customers out there who have needs, how can my organisation (using its products and services) satisfy these needs!
Although in ADapT we use quite a lot on a customer or market-focused techniques, most probably because one of the main tools we use in EXTRACT is a human-centred innovation and design. This initial view would be very deceptive. We are not ‘sold’ on a customer focused approach to the exclusion of product or service-based thinking. As you read on you would realise that we have taken quite an unconventional stance on the subject.
Either strategy or approach is perfectly valid, but they each have different rules. So the main thing is not what strategy you are following for which service or product, as long as you are clear what you are doing where!
So, there is also nothing wrong with using a product strategy for one product or service and a customer-focused strategy for the next. What is a problem is when you start mixing data and techniques, assuming that an answer you got using one approach applies to the other. Sometimes we ask pretty similar questions for entirely different reasons. It’s often the reason that determines the content of the data and feedback – not the question asked!
With a customer or market-focused, focus on determining new or emerging needs for a customer, or group of customers in your market. Most of your resource allocation focus on asking, answering and understanding these needs – you then use the determined needs to develop new or update existing products and services. You don’t assume you already understand customers or the market or customer needs – you purposefully ignore your current product and its features when trying to understand needs (and this is VERY important).
On the other hand, being product-focused, most of your efforts are directed at developing cool new products and services that can do cool things and service needs that customers did not even know they have. Then you focus your efforts to make people aware that they indeed have that need, and while you are doing it, you keep on polishing your offering, making it more and more appealing.
One can say that a customer or market-focused organisation aim to keep pace with customer and market needs and demands. In contrast, product-focused businesses aim to set direction and lead customer demand (but even that would be an oversimplification).
Much of the disruptive innovation that took place in the past is often product-focused, but in the same vein, you can also say that having a product-focused strategy for your core products and services are seemingly well aligned with sustaining innovation efforts. That, however, would be a misleading conclusion to draw as successful sustaining innovation is more often than not, the result of a customer or market-focused efforts.
You also by now realise that the environments in which these two strategies are applied are different, and the two approaches require different skills, capabilities, and how you use technology. Ultimately it also implies different methods, tools and ways of thinking.
If you think you are using one, but behave and operate like you are using the other – chaos will ensue. Your organisation need to pay close attention to its products and services, and to its customers and markets. Knowing whether a product or customer-focused approach is the primary as a driver, in which part of the organisation, is critical.
The truth is that when market conditions are stable, either strategy can work equally well. It is times of flux and rapidly changing markets choosing your poison becomes more critical.
For a customer and market-focused approach to work in these conditions – the two main organisational capabilities required are speed and agility!
You need to know what you don’t know about the changing customer and market behaviour, and you need to do so fast! The same data is often also available to your competitors, and it’s the company that can draw the best conclusions and make the best decisions that will win.
Data is also vital for product-focused organisations, but here it’s much more insight and foresight game than speed and agility, that will determine who wins. Here, analysis of customer data often focuses on sub-groups on the fringes where new needs and novel ways of using existing products and services are discovered.
In a product or service space, you need to leverage data, and also need to combine it with intuition and imagination and try to see opportunities overlooks by (both) customers and the competition. It also requires an entirely different mindset, willing to wait and try a lot of options and even a willingness to make bets that often don’t pay-off!