Service-Model Thinking for Product-Model Folks: Are you a Grocer or a Chef?

1. Rich Mironov SVPMA, 4 April 07 Service-Model Thinking for Product-Model Folks:Are you a Groceror a Chef?

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

3. I’ve Been in Tech So Long…

4. …Newsletter on Startups & Products The secret life of Product Managers • “Parenting and the Art of Product Management” • “Goldilocks Packaging” • “Sharks, Pilot Fish, and the Product Food Chain” • http://www.mironov.com/articles/ • Recent survey about PMs and service-versus-product http://www.mironov.com/more/survey_results/

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?

6. Licensed Enterprise Software …is like delivering groceries Enterprise IT is responsible for: • Choosing the right items • Combining them correctly • Managing hours and uptime • Serving and helping users • Producing tasty results

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

8. Product & Service Models Product Model • One-time fee or license • With or without maintenance Subscription Service Model • Monthly fee per user Transaction Service Model • Per fax, per download, per transplant, per report, per hour, per update…

9. Four Key Service-Model Lessons Being the chef, not the grocer: • Build a multi-tenant infrastructure • Expect slower, incremental sales • Do continuous marketing • Get real user feedback

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

11. Not a New Idea Well-designed software should be host-able But need to set priority for… • Details of user hierarchies • Reporting, billing, invoicing • Third party data security obligations See Luke Hohmann’s Beyond Software Architecture

12. New Kinds of Service Metrics You 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…”)

13. 2. Incremental Sales Cycle Initial 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 great Revenue ramp is slower …upsell to more users …upsell premium features

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

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 à continuous marketing • Touch users early, often and honestly • Good news: you have actual user names

16. Frequent, Helpful Contact Friendly, low-pressure tone • Topic of the month • User profile (success story of the month) • New features • FAQs • Support contacts

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

19. …use your own service if you can Dare to Taste Your Own Food

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 data You may be asked for a service model soon. Grab your cookbook!

21. Q & A

22. Time permitting… see http://www.mironov.com/more/survey_results.htm PM Survey Recap

23. 180 Responded to PM Survey Pricing 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%

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 • We're dramatically overloading our offerings! • Service PMs use product registrations more than user profiles to identify users

25. Selling and Upselling • 33% faster close cycle for subscriptions • Service tilt toward small/medium businesses Different upsell models… ProductSubscriptTransxn Selling new versions/upgrades 76% 46% 38% Selling more units 83% 46% 50% Higher-priced subscriptions 28% 83% 44% Adding more users 47% 68% 29%

26. Understanding Users “We know which features/functions our customers use via...” ProductSubscriptTransxn Personal 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%

27. Over-Featured Products? “I think my typical customer uses...” Product: 48% of available features Subscription: 48% of available features Transaction: 52% of available features

28. Rich Mironov SVPMA, 4 April 07 Thank You!