Motivated From Within®

Service-Model Thinking for Product-Model Folks:

Are you a Groceror a Chef?

Rich MironovSVPMA, 4 April 07

© 2007 Enthiosys 2

An Unapologetic Product Guy

• CMO at Enthiosys, a product strategy consultancy

• Consult 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

© 2007 Enthiosys 3

I’ve Been in Tech So Long…

© 2007 Enthiosys 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.enthiosys.com

• Recent survey about PMs and service-vs-product http://www.mironov.com/more/survey_results/

© 2007 Enthiosys 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?

© 2007 Enthiosys 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

© 2007 Enthiosys 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

© 2007 Enthiosys 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…

© 2007 Enthiosys 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

© 2007 Enthiosys 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

© 2007 Enthiosys 11

Not a New Idea

Well-designed software should be host-ableBut need to set priority for…

• Details of user hierarchies• Reporting, billing, invoicing• Third party data

security obligations

See Luke Hohmann’sBeyond Software Architecture

© 2007 Enthiosys 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…”)

© 2007 Enthiosys 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

© 2007 Enthiosys 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

© 2007 Enthiosys 15

• “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

3. Continuous Marketing

© 2007 Enthiosys 16

Frequent, Helpful Contact

Friendly, low-pressure tone

• Topic of the month

• User profile (success story of the month)

• New features

• FAQs

• Support contacts

© 2007 Enthiosys 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 being used?– Error reporting

© 2007 Enthiosys 18

© 2007 Enthiosys 19

Dare to Taste Your Own Food

…use your own service if you can

© 2007 Enthiosys 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 servicemodel soon. Grab your cookbook!

Motivated From Within®

Q & A

Motivated From Within®

PM Survey Recap

Time permitting… see http://www.mironov.com/more/

survey_results.htm

© 2007 Enthiosys 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%

© 2007 Enthiosys 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

© 2007 Enthiosys 25

Selling and Upselling

• 33% faster close cycle for subscriptions• Service tilt toward small/med businesses

Different upsell models…

Product Subscript Transxn

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%

© 2007 Enthiosys 26

Understanding Users

“We know which features/functions our

customers use via...”

Product Subscript Transxn

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%

© 2007 Enthiosys 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

Motivated From Within®

Thank You!

Rich Mironov

SVPMA, 4 April 07