Who Really Has the Most Influence?

How can you know whose advice to follow and whose to ignore? I see executives behaving like car-chasing dogs in the middle of a busy intersection, barking furiously and trying to run in all directions at once. Top management says, "Make it look like Outlook 98." Marketing says, "Match the competition." Sales says, "This customer wants that feature." The programmers say, "Stay consistent with our last version." Who are you to believe?

Product-development managers try their best to say yes to all of these constituents. Programmers have disproportional influence because of their ownership of the code, so their goals tend to be met regardless. However, the one group whose needs always seem to take precedence over others' is the customers. After all, although each constituency is standing there demanding action, the customer is the only one who is also holding a check. No businessperson can fail to be influenced by that!

The Customer-Driven Death Spiral

If you take that check, you begin the transformation into a "customer-driven" company. Although this has a nice ring to it and is widely used, it is a mistake. It puts you squarely on the back of the tiger. Throughout the 1980s, IBM prided itself on being a customer-driven company, and it let its customers drive it right off the top of the mountain. IBM virtually owned the computer business back then to a much greater extent than Microsoft does now yet it is just one of the pack today still large, but a follower and not a leader.

Usually, a new company bases its first product on some technological advance. That first product is designed according to the inside vision of how things should be done. At this stage, what customers the company might have are only loosely committed and will offer only desultory guidance. After the new product is finally delivered, though, the customers become more self-interested because they are investing time and energy into the product. Inevitably, they have requests for changes and additions.

There is a big difference between listening to and following your customers. Listening is good. It means applying your own filter to what you have heard. Following is bad. It means merely doing what your customers tell you to do. This lets the tiger decide where you will go.

After the vendor begins to let its customers dictate what features the product will have, a very serious, but almost unnoticeable, change transforms the vendor. The vendor ceases to be a product company, inventing things to sell to its customers, and becomes a service company, performing jobs on demand for its customers. Everyone inside the company is sensitive to this subtle shift in power, and they correctly respond to it by promoting the demands of the client above all others.

Today, many enterprise-software companies, such as Oracle and SAP which experienced explosive growth in the early 1990s as their modern, client-server architecture replaced the older, mainframe software are reliving IBM's customer-driven nightmare. After introducing their new technology, these so-called enterprise resource planning (ERP) companies started listening to their customers. They began to add features that their customers requested, without fitting them into a larger, longer-term plan.

I have heard managers tell me that no change whatsoever is made to their product unless a customer demands it. Each customer does business in a slightly different way, and each one asks the ERP company to make changes and add features to accommodate its particular methods. In a misguided effort to be helpful, the eagerly listening, blindly following, customer-driven vendor complies.

You are a single vendor, but you will have dozens or hundreds of customers. If you respond to them all (or to the biggest ones), who is reconciling their conflicting demands?

Many of the high-tech managers I know have backgrounds in engineering and are often former programmers. At the least, they have acquired their positions because they are very knowledgeable about and sympathetic to programmers. As I showed in Chapters 7, "Homo Logicus," and 8, "An Obsolete Culture," programmers look to functions and features for answers. When customers bring requests for features in one hand and a check in the other, technical managers find the combination irresistible. This is one more reason why so many product-development organizations use feature-list negotiation to manage themselves. They are riding the tiger, and deadline management assures that they will ride at a dizzying pace.

Conceptual Integrity Is a Core Competence

After you take that check, you are handing over the reins of your product-development shop. The customer might have money, but it lacks two vital things: It doesn't have your best, long-term interests at heart, and it doesn't know how to design your product.

Customer-driven products don't have a coherent design. They lack what software guru Frederick Brooks calls "conceptual integrity," a single-minded vision of a program which, he goes on to say, is the most important ingredient for success. Lacking conceptual integrity, two things happen: The customers take control of your product's design, and you abdicate control of your product's design. The customers, no matter how well meaning they might be, don't have the ability to think of your product as a single, conceptual whole. Having a clear vision is a core competence, and most companies are hard pressed to focus sufficiently on their own business, let alone yours. Even while they are shouting conflicting orders at you, they are expecting you to select the right ones to obey.

When you are customer driven, your product mutates from one release to the next, instead of growing in an orderly manner. The product ends up filled with mismatched parts and random features and becomes what product developer John Zicker calls a "dog's breakfast." Each customer has to pick its way through your product, finding the features it likes and avoiding the features it doesn't, but all of them find the going gets tougher with each new release. Some well-known companies have products that are so incredibly complicated that it takes months of training to do even the simplest tasks. Entire businesses spring up to train, install, configure, and maintain these monsters. Although customers might purchase a dog's breakfast, there is little love for the product. It has no desirability, which, as I showed in Chapter 5, "Customer Disloyalty," makes it and you very vulnerable to competition.

A Faustian Bargain

One way to look at this shift from a vision-driven company to a customer-driven company is as a shift from a product company to a service company. David Maister's remarkable book, Managing the Professional Service Firm,^[1] talks about the problem of being customer driven in the different context of a service provider: a consultant. Of course, because the service business is very different, he uses very different terms. He speaks of selling his problem-solving expertise versus selling his past experience. He refers to them as "brains" and "gray hair," respectively.

^[1] David Maister, Managing the Professional Service Firm, 1997, Free Press, New York, New York, ISBN 0-684-83431-6.

Selling brains is difficult. Anyone who will hire you for your brains must trust you to a high degree, because they are expecting you to do something that you have not yet demonstrated competence in. Selling gray hair is easier. A potential client can see that since you have solved this same problem before, you can solve it again for them.

Most consultants start out selling brains to their colleagues that is, people who already have an established trust. When the consultant solves the client's problem, she begins building a reputation, and more clients appear at the door. These clients will be progressively more removed and will have progressively less trust in the consultant at the outset. So they will ask the consultant to do gray-hair jobs. After all, your experience attracted the new client, and it is the kind of assignment that a client will give to an unproven vendor.

After a consultant establishes her reputation, her gray-hair clientele grows, and she finds herself making more and easier money by applying her experience. After all, she is doing the kind of work that she has already done many times.

As your business gradually shifts from a brains business to a gray-hair business, the very qualities that make you valuable as a consultant begin to wane. You fall off the cutting edge. The service you offer is not one of brilliant problem solving, but one of pedestrian task execution. Your desirability as a consultant shrinks, and your own clients begin assigning you ever-more-demeaning, low-level tasks. They begin to court other consultants who are farther out on the cutting edge those who use their brains more.

It's the customer-driven death spiral all over again, but this time from a service perspective.

The lesson is that if you become customer driven, you accept easy money in the short term, but you cease to grow, and you resign any hold on the future. You give up your role as a leader.

Everyone colludes in this game. Customers are very comfortable with it. The new ones approach you and say, "Put this one feature into your product, and then I'll buy it." This is a test to see whether you are a compliant service organization. The sales force puts a lot of effort into such a big sale, and adding one little feature seems like such a small price to pay for establishing a relationship with a new customer. Revenue beckons.

The solution that Maister proposes is obvious: Do more brains projects. In the service context, you have to convince your current gray-hair clients to give you brains work, and he goes on at length on how to do that. He says it means turning down the easy money of gray-hair projects to get harder and less-profitable brains projects from existing clients. Translating Maister's solution into the product business, we find that whereas all customer requests are gray-hair jobs, the brains jobs are all internally driven assignments. In other words, it's your responsibility as a product manager to keep yourself on the cutting edge and avoid the customer-driven death spiral. You have to look inside yourself for answers, the same way you did when you first started.

It means taking a longer view, taking responsibility, taking time, and taking control.

Taking a Longer View

In order to maintain your competitive edge, you have to put short-term gain into perspective. You must ensure that your people understand that when you focus exclusively on short-term gains, you start a time bomb ticking. You must avoid doing this despite the short-term expense.

Taking the longer view means walking away from some very lucrative deals. This is hard to do but necessary for your survival in the long term. In my experience, you rarely actually lose those deals. If you have the confidence to walk away from a client proffering money, that client will likely gain increased trust in you and reevaluate what they are asking of you. Still, you must be willing to walk.

Taking Responsibility

You have to establish the balance early on. You can't say, "I'll just use short-term tactics for two years and then switch to long term." You have to balance both from day one. You can always postpone short-term thinking, but you can never postpone long-term thinking.

This is all about corporate culture, and it is hard to introduce the long view to an established short-view culture. It is risky to step back from the lucrative precipice of being customer driven. You will draw fire. Take heart that you are doing the right thing.

Taking Time

Many high-tech companies have a policy of shipping a new release of their software every year. Some ship even more frequently than that. This means that their main body of programmers is working on an annual cycle, and that any work must go from conception to design to programming to testing to market within that year. This is too fast to do really innovative design, so most companies try to overlap design with programming. As I've described at length already, when you overlap design and programming, what you get is programming.

Taking Control

Above all, high-tech development managers have to seize control of their development process away from the rampant tiger. You have to get off of the beast and take the inevitable thrashing. If you survive it, you can then begin to rebuild your process so that you balance brains and gray-hair work and keep your edge for the future.