Then the Product

With the floor in place, the product goes in next, and it goes in differently. I want to be precise about what changes, because the product is where most owners feel most competent, and the suggestion that it should be built in a different way can sound like an insult. It is not. The product is usually good. What was missing was the information that would have told the owner what the product has to do.

A product built on the roof has to do everything. It has to attract customers, because there is no other way of finding them. It has to justify the price, because the price was set by feel. It has to be improved constantly, because improvement is the only lever the owner can see. It accumulates features, tiers, options and exceptions, each added for a customer who asked, until it is a different product for every buyer and a full-time job to deliver. The owner is proud of it and exhausted by it in equal measure.

A product built on a floor knows what it has to earn. The business model says who it is for and the margin it has to leave behind. The financial model says how many of it have to be sold, at what price, by which month. The operating plan says how its performance is checked. Suddenly the product has a job description, and the job is not to be everything. It is to deliver a specific result for a specific customer at a margin that pays the business and its owner.

This changes the questions the owner asks about it. Not "what else could we add?" but "what could we remove and still deliver the result?" Not "what does this customer want?" but "is this customer the one the model says we serve?" Not "how do we make it better?" but "what does better mean in the numbers?" The product becomes something the business does rather than something the business is, and that is a relief to the owner whose identity has been tangled up in it for years.

The response is to hold the product up against the floor and see where it does not fit, which it will not, in at least two places.

First, the margin. Take the sums from last week and look at the versions of the product that earn the least once the owner's time is counted. These are usually the custom versions, the ones built for a particular customer and never retired. The floor says they go, or they get priced at what they cost. The roof would have kept them because a customer once wanted them.

Second, the customer. The product has probably drifted towards whoever shouted loudest, and the model says who the business is for. Where the product has grown features for the tail, it can lose them. Where it is missing something the best customers need, that is the one addition worth making, and the model will show you what it is worth.

Third, and this is the hard one, the owner's time. A product that cannot be delivered without the owner is not a product; it is the owner, packaged. The floor makes this visible because the owner's hours are a cost in the model, and the product that consumes them all is the product that is holding the business at its current size. Deciding what the product is without the owner in it is the single most valuable product decision most owners can make, and it is only possible once the numbers show what it is costing them not to.

None of this means the product gets worse. In my experience it gets better, because the effort that went into being everything to everyone goes into being the right thing for the customers the business is actually built on, and those customers notice.

Tomorrow I want to spend a whole essay on the number the product is sold at, because pricing on a floor is a different activity from pricing on a roof, and it begins with saying the figure plainly.

Continue reading: Say the Number Plainly, Then Stop Talking →

The session: The Nine Fears, and the floor underneath your business. Wednesday 2 December, 5pm UK, free →

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The book: The Science of Getting Rich and How to Apply It →