I know I have had my struggles, and every great product team struggles with alignment. This is not because people do not care; it is just that they care about different things. Engineers focus on delivery, product managers focus on adoption, and executives focus on business results. When those dimensions drift apart, teams move fast but not forward. I have witnessed this happen several times in my product management career.
What has worked for me is to think of alignment not as this magical motivational thing, which somehow gets everyone “rowing in the same direction,” but as three independent layers that connect business vision to user value and team execution: Impact, Outcomes, and Outputs.
1. Impact: The “Why” that defines the direction
Impact represents the business or societal change you are ultimately trying to drive. It is the Polaris of your endeavor; in other words, the problem worth solving at scale.
It is very tempting to frame impact in broad terms (“make collaboration easier” or “we got a strategy document for the business unit out in 7 days versus 3 months”). High-performing teams articulate their impact in measurable and enduring terms. You can argue that the statement about delivering a strategy document in 7 days is a measurable impact, but is it endurable? Impact is about creating scalable systems, not heroics. Think of impact as the long-term return on investment the organization seeks for its investment.
Examples of Impact Metrics:
Increased customer retention rate (e.g., 5% YoY)
Reduced cost of sales or service delivery
Faster time-to-compliance in regulated industries
Increased revenue per active account or license
Impact metrics rarely change quarter over quarter; they provide continuity of purpose over years. They also define trade-offs when you know why you are building. It is easier to say no to things that do not move the needle.
2. Outcomes: The “What” that shapes behavior
If impact is the why, outcomes are the what, as in the behaviors and signals that show whether you’re actually on the right track.
Outcomes sit at the intersection of user and business value. They describe what users are doing differently because of your product, as in
Using it more often
Adopting key features
Reporting higher satisfaction
Examples of outcome metrics:
Monthly Active Users (MAU), or Daily Active users (DAU)
Reduction in customer onboarding time
NPS or CSAT improvement
Increased frequency of automation runs or task completions
Higher conversion rates from free to paid tiers
Outcomes serve as leading indicators of impact because they occur before other changes. A change in adoption or engagement predicts future retention, revenue, or efficiency improvements. The best teams track both the “health” (e.g., uptime, latency) and “happiness” (e.g., satisfaction, usage depth) of their outcomes to anticipate issues before they show up in impact metrics.
Outputs: The “How” that powers the execution
Finally, outputs are the things that you actually build: features, releases, integrations, and system improvements. They are the evidence of effort, not the evidence of success.
Outputs are essential for driving momentum and enabling measurement, but when teams fixate on them (“We shipped 10 features this quarter”), they risk mistaking activity for achievement.
Examples of output metrics:
Deployment frequencies (DORA Metrics)
Cycle time from idea to release
Defect escape rate
Number features shipped or API integrations added
In agile and platform environments, outputs are best viewed as hypotheses. Each output should have a traceable link to an intended outcome and, by extension, a measurable impact. This is where architecture and product management intersect: we are just not shipping code; we are testing theories about what will create value.
Bringing it all together: Alignment equation
When you connect these layers, something powerful happens:
Impact defines direction: What mountain are you climbing?
Outcomes define the progress: How far up have you gone?
Outputs define effort: How effectively you are climbing.
I prefer using equations, and the one above best defines alignment for me. Impact and outcomes grow together and enhance each other; however, this enhancement relies on meaningful outputs, which influence impact and outcomes.
Putting it another way, these are attributes of a feedback system. Outcomes inform which outputs are working. Impact shapes which outcomes matter most. Outputs provide the data that helps refine both.
This loop is the foundation of continuous alignment; it ensures that as teams evolve, the system self-corrects towards value.
An example from my career: The low-code experience
When I was employed at Microsoft, in the low-code team, the impact of the platform was clear from day one: democratize software creation and reduce dependency on central IT.
The outcomes it targeted were behavior shifts: citizen developers creating solutions faster, IT departments approving more governed automation, and organizations responding faster to change.
The outputs? New connectors, governance features, collaborating with code-first developers, and AI-assisted workflows. Each output served an outcome that laddered to the core impact.
In aligning those three layers, the low-code platform transformed a set of tools into an ecosystem that scaled adoption, a thriving community, and trust. A great case of driving alignment with compounding returns.
How to Use the Alignment Trifecta
Start with “Why”: Clarify the enduring business impact your team supports.
Define measurable outcomes: Focus on user behaviors or signals of value.
Plan outputs as experiments: Ship intentionally, not habitually.
Create feedback loops: Tie sprint reviews or OKRs back to all three levels.
Reassess quarterly: As markets, customers, or strategy shift, realign your trifecta.
Final Thought
Alignment isn’t a memo; it’s an architecture, as I like to call it. When teams see how their day-to-day work (outputs) links to user behaviors (outcomes) and organizational purpose (impact), execution becomes meaningful, not mechanical.
The alignment trifecta is the connective tissue between strategy and shipping, and when done right, it turns product teams into value engines that sustain themselves long after individual projects are done.
P.S. this blog was inspired by the book Impact First by Matt Lemay
Sometimes it is great to look into the past to see how leaders back then dealt with the changing times. Oddly enough, some of their learnings still resonate even today. I had a chance to reread Sun Tzu’s The Art of War and the Arthashastra from Kautilya. In a world of constant competition between nations, businesses, or algorithms, these two ancient texts continue to define how leaders think about power, conflict, and decision-making. The blog this week takes a more philosophical lens to analyze strategies from the years before and their relevance in today’s world.
Separated by geography but united in purpose, both these works of literature are more than just military manuals; they are frameworks for leadership and strategy that remain stunningly relevant today.
The Philosophical Core
Theme
Arthashastra (Kautilya)
The Art of War (Sun Tzu)
Objective
Build, secure, and sustain the state’s prosperity
Win conflicts with minimum destruction
Philosophy
Realpolitik—power is maintained through strategy, wealth, and intelligence
Dao of War—harmony between purpose, timing, and terrain
Moral Lens
Pragmatism anchored in moral order
Pragmatism anchored in balance and perception
Definition of Victory
Stability, order, and prosperity of the realm
Winning without fighting; subduing the enemy’s will
Both leaders agree: victory is not about destruction, and it is more about preservation of advantage.
Leadership and Governance
Kautilya: The leader, as the chief architect of the state, city, organization, or department, is obligated to prioritize the welfare of the people. Leadership represents both a moral and economic contract; thus, a leader’s fulfillment is intrinsically linked to the happiness of their direct reports.
Sun Tzu: The leader is the embodiment of wisdom, courage, and discipline, whose clarity of judgment determines the fate of armies
In modern times, in the context of Kautiliya, the leader represents the CEO/statesman, designing systems of governance, incentives, and intelligence; Sun Tzu represents the COO, optimizing execution and adapting dynamically.
Power, information, and intelligence
Information in both books is seen as a strategic asset. This includes gathering information and then acting upon the given information; it does emphasize more acting on it versus just gathering.
Aspect
Kautilya
Sun Tzu
Intelligence System
Elaborate network of informants: agents disguised as monks, traders, ascetics
Emphasis on reconnaissance, deception and surprise
Goal of Data Gathering
Internal vigilance and monitor external influence
Tactical advantage and surprise
Philosophical view
Informants are the eyes of the leader
All warfare is based on deception and having leverage
In the age of data and AI, the lesson is clear: those who control information and stories will succeed in the long run.
War, Diplomacy, and the Circle of Power
Kautilya’s Mandala Theory: Every neighboring state is a potential enemy; the neighbor’s neighbor is a natural ally. The world is a circle of competing interests, requiring constant calibration of peace, war, neutrality, and alliance.
Sun Tzu’s Doctrine: War is a last resort; the wise commander wins through timing, positioning, and perception.
Modern parallel:
Global supply chains, tech alliances, and regulatory blocs function exactly like Kautilya’s mandala: interdependent, fluid, and shaped by mutual deterrence.
Economics as a strategy
In the Art of War focuses on conflict, while the Arthashastra expands into economics as the engine of statecraft. Kautilya views wealth as the foundation of power, with taxation, trade, and public welfare as strategic levers.
“The state’s strength lies not in the sword, but in the prosperity of its people.”
In business terms, this is all platform economics; power arises from resource control, efficient networks, and sustainable growth, not endless confrontation.
Ethics, Pragmatism and the Moral Dilemma
Both authors are deeply pragmatic but neither amoral.
Kautilya: Ends justify means only when serving public welfare. Ethics are flexible but purpose-driven.
Sun Tzu: Advocates balance, ruthless efficiency tempered by compassion, and self-discipline.
For modern leaders, this balance is critical: strategic ruthlessness without moral erosion.
Enduring Lesson for Today
Timeless Principle
Modern interpretation
Know yourself, and your adversary
Data, market, and competitive intelligence
Control information, and perception
Own the narrative, brand, and customer psychology
Adapt to the terrain
Agility in shifting markets and technologies
Economy of effort
Lean operations, precision focus
Moral Legitimacy
Trust, Transparency, and long-term brand equity
Both texts converge on the following point:
Leadership is the art of aligning intelligence, timing, and purpose, not merely commanding resources.
Fusion Mindset
If Sun Tzu teaches how to win battles, Kautilya teaches how to build empires. Combined, they offer a 360-degree view of power:
Sun Tzu = Operational mastery: speed, tactical advantage, and timing.
Kautilya = Structural mastery: governance, economics, and intelligence.
Together they form a dual playbook for today’s complex systems, from nation-states to digital ecosystems.
Conclusion
Both The Art of War and Arthashastra remind us that strategy is timeless because human behavior is timeless.
Whether you lead a nation, a company, or a team, the challenges are the same: limited resources, competing interests, and the need to act with clarity under uncertainty
In the end, wisdom isn’t knowing when to fight; it’s knowing when to build, when to adapt, and when to walk away.
The modern business landscape has witnessed a shift in how companies approach growth, with two methodologies emerging as dominant forces: Product-Led Growth (PLG) and Customer-Led Growth (CLG). PLG drives rapid initial expansion through product virality and self-service models, while CLG prioritizes deep customer understanding and outcome-focused innovation for sustainable growth. PLG organizations often face a single intense growth phase, while CLG organizations build competitive advantages through superior product-market fit and innovation. Recognizing that a hybrid model—leveraging PLG for market penetration and transitioning to CLG for sustainability—offers a compelling path forward, companies understand how these approaches influence key behaviors in product management and impact measurement.
Understanding Product-Led Growth: The Product as the Primary Driver
Product-Led Growth is a strategy where the product is the main way to attract, engage, and keep customers. In PLG companies, the product itself serves as the key sales and marketing tool, as seen with Slack and Dropbox, which let users enjoy immediate benefits through free trials or freemium options. The core idea of PLG is that when customers see real value from the product, moving to a paid plan feels natural and easy.
The PLG model is based on key principles that set it apart from traditional growth strategies. Companies using PLG focus on self-service onboarding, reduce human involvement in sales, and depend on the product’s natural appeal to encourage growth. This requires products to be easy to use so that users can quickly understand and benefit from them, with sharing features integrated into the experience. The strategy believes that happy users will become advocates, creating a referral cycle that leads to ongoing customer growth.
However, the effectiveness of PLG is highly dependent on product characteristics and market conditions. Research indicates that PLG works best for products that are simple enough for users to understand immediately and where sharing is naturally integrated into the user experience. Products like Calendly, which enables easy calendar scheduling, represent ideal candidates for PLG implementation due to their straightforward value propositions and built-in sharing mechanisms.
The Merits of Product-Led Growth: Speed and Efficiency
Product-Led Growth offers several compelling advantages that have driven its widespread adoption across the software industry. The most significant benefit is the dramatically reduced customer acquisition cost (CAC) that results from the product’s ability to sell itself. When executed effectively, PLG can eliminate the need for extensive sales teams and expensive marketing campaigns, as satisfied users become organic advocates who drive word-of-mouth growth. This cost efficiency is particularly valuable for startups and companies operating with limited resources.
The speed of PLG implementation represents another crucial advantage. Companies can achieve faster time-to-value for customers by providing products that deliver immediate, tangible benefits without requiring extensive onboarding or training. This rapid value delivery accelerates customer adoption and can result in shorter sales cycles compared to traditional sales-led approaches. The self-service nature of PLG also allows companies to scale their user base without proportionally increasing their support infrastructure, creating opportunities for rapid growth.
PLG also generates valuable data insights that inform product development and business strategy. By tracking user behavior and product usage patterns, companies can gain direct insights into customer preferences and needs. This data-driven approach enables more informed decision-making and allows companies to optimize their products based on actual user behavior rather than assumptions. The continuous feedback loop created by PLG can accelerate product iteration and improvement cycles.
The Limitations and Drawbacks of Product-Led Growth
Despite its initial appeal, Product-Led Growth faces significant limitations that become apparent as companies mature and market conditions evolve. One of the most critical challenges is that PLG typically experiences only one sustained growth phase before requiring substantial strategic pivots. As companies grow and their products gain complexity, the self-serve model often hits a plateau where users can no longer achieve advanced outcomes without additional support and guidance. This limitation forces PLG organizations into a continuous cycle of launching new products and ramping up features to maintain growth momentum.
The requirement for near-perfect product experiences from launch represents another significant challenge for PLG organizations. Unlike sales-led models where customer feedback can gradually shape product development, PLG demands a high degree of polish and intuitive design from the beginning. This pressure can lead to rushed product launches or oversimplified solutions that fail to address complex customer needs adequately. The emphasis on immediate usability often comes at the expense of depth and sophistication in functionality.
PLG also struggles with products that require significant customization or serve complex use cases. Research shows that as products move along the complexity spectrum, user proficiency can only keep pace with additional human support, leading to inevitable revenue plateaus. Companies like Salesforce and Segment, which offer robust and multifaceted solutions, often require more hands-on approaches to effectively onboard and support users. This limitation means that PLG is not universally applicable and may actually hinder growth for companies with sophisticated product offerings.
Furthermore, PLG can limit a company’s ability to reach certain customer segments and may create dependencies on specific user behaviors that may not scale across diverse markets. The reliance on viral growth and word-of-mouth can be unpredictable and may not provide the consistent, scalable growth needed for long-term business success.
Understanding Customer-Led Growth: Outcomes Over Features
Customer-Led Growth represents a fundamentally different approach that prioritizes deep customer understanding and outcome-focused innovation over product features and viral mechanisms. CLG organizations place customer insights at the center of all business decisions, from product development to service delivery, ensuring that every initiative directly contributes to customer success and value creation. This approach recognizes that sustainable growth comes from consistently delivering superior customer experiences rather than relying on product virality alone.
The CLG methodology involves continuously gathering customer feedback, analyzing customer behavior patterns, and adapting offerings to meet evolving customer needs. Unlike PLG, which assumes that a great product will naturally drive growth, CLG actively seeks to understand what customers are trying to achieve and builds solutions that enable those outcomes. This approach requires organizations to develop sophisticated customer research capabilities and create feedback loops that inform strategic decision-making across all business functions.
CLG organizations focus on qualifying and quantifying the value delivered to customers, ensuring that business success is directly tied to customer success. This alignment creates a symbiotic relationship where customer achievements drive business growth, leading to higher retention rates, increased customer lifetime value, and more sustainable revenue streams. The approach also emphasizes building strong customer relationships and fostering brand advocacy through consistent value delivery.
The Competitive Advantages of Customer-Led Growth
Customer-Led Growth offers several distinctive advantages that address many of the limitations inherent in Product-Led Growth models. Most importantly, CLG organizations achieve superior product-market fit by continuously aligning their offerings with actual customer needs and desired outcomes. This deep alignment results from the systematic collection and analysis of customer insights, ensuring that product development efforts focus on capabilities that directly contribute to customer success rather than feature accumulation for its own sake.
Contrary to common assumptions, CLG organizations are not slower than their PLG counterparts in achieving growth. The customer-centric approach enables faster identification of market opportunities and more targeted innovation efforts, leading to higher success rates for new initiatives. By focusing on customer outcomes rather than product features, CLG organizations can make more strategic decisions about resource allocation and avoid the feature bloat that often plagues PLG companies seeking to maintain growth momentum.
CLG drives innovation that lifts entire industries rather than just individual companies. By deeply understanding customer challenges and working to solve fundamental problems, CLG organizations often develop breakthrough solutions that set new industry standards. This type of innovation creates competitive moats that are difficult for competitors to replicate, as they are based on deep customer relationships and understanding rather than easily copied product features.
Perhaps most importantly, CLG enables organizations to scale securely without compromising foundational capabilities. Unlike PLG organizations that may sacrifice security, reliability, or customization capabilities in pursuit of viral growth, CLG organizations can build robust, enterprise-grade solutions that meet sophisticated customer requirements. This approach supports long-term customer relationships and enables expansion into enterprise markets without requiring fundamental architectural changes.
CLG also provides more predictable and sustainable revenue growth. By focusing on customer success and retention, CLG organizations typically achieve higher customer lifetime values and more stable revenue streams. The emphasis on customer outcomes creates natural expansion opportunities as successful customers seek to achieve additional goals or scale their usage of proven solutions.
The Emerging Hybrid Model: Combining Strengths
Recognition is growing that neither PLG nor CLG represents a universally superior approach, and that the most effective strategy often involves combining elements of both methodologies. The hybrid model acknowledges that different stages of the customer journey and different types of products may benefit from different growth approaches. This evolution represents a maturation of growth strategy thinking, moving beyond one-size-fits-all solutions toward more nuanced, context-specific approaches.
The hybrid model typically begins with PLG principles to drive initial customer acquisition and early-stage engagement. The product serves as the primary vehicle for attracting users and demonstrating initial value, leveraging the cost efficiency and scalability benefits of the PLG approach. This initial phase allows companies to reach broad audiences and identify potential customers who experience meaningful value from the product. The self-service nature of PLG enables rapid market penetration and user base growth.
However, the hybrid model transitions to CLG principles as customers seek to achieve more sophisticated outcomes or as their usage scales. This transition recognizes that complex customer needs often require human support, customization, and deeper relationships to achieve success. The shift to CLG enables companies to capture greater value from their customer relationships while providing the level of support and guidance necessary for customer success in complex scenarios.
The hybrid approach is particularly effective for companies seeking to move upmarket or expand into enterprise segments. Initial PLG success can demonstrate product value and build market credibility, while the transition to CLG enables the company to address the more sophisticated requirements of enterprise customers. This progression allows companies to grow their customer base efficiently while building the capabilities necessary to serve high-value customer segments.
Implementation of the hybrid model requires careful orchestration of sales, marketing, customer success, and product teams to ensure smooth transitions between growth approaches. Companies must develop the capability to identify when customers are ready for more sophisticated support and ensure that the transition enhances rather than disrupts the customer experience. Success with the hybrid model often depends on having robust customer segmentation and the organizational flexibility to deliver different types of experiences to different customer categories.
Product Management Practices in PLG vs. CLG Environments
The divergence between Product-Led Growth (PLG) and Customer-Led Growth (CLG) extends to fundamental shifts in product management methodologies, requiring distinct strategic approaches, collaboration models, and success metrics. Product managers operating in these environments face radically different priorities that influence every stage of the product lifecycle, from discovery to delivery.
Strategic Focus and Prioritization
In PLG organizations, product managers prioritize feature development that drives organic adoption and virality, often optimizing for metrics like activation rate and time-to-value (TTV) . The product roadmap focuses on removing friction points in the user journey while embedding growth loops directly into the product architecture. For example, Calendly’s product team redefined their activation metric from a single meeting scheduled to five meetings booked within a specific timeframe, ensuring users formed lasting habits with the tool . This data-driven approach requires continuous A/B testing of onboarding flows and feature placements to maximize self-service conversion rates. CLG product managers, conversely, prioritize outcome-aligned capability development over viral features. Their roadmaps emerge from deep analysis of customer-reported challenges and desired business impacts, with features validated against specific customer success metrics before development begins . At companies like Arm & Hammer, product teams used direct customer feedback about unconventional product uses to develop entirely new product lines, demonstrating CLG’s focus on solving articulated customer needs . This approach demands rigorous customer journey mapping and value quantification at every development stage.
Customer Engagement and Feedback Mechanisms
PLG product teams leverage in-product behavioral analytics as their primary feedback mechanism, using tools like heatmaps and feature adoption rates to infer customer needs . When Dropbox observed users struggling with file-sharing workflows through analytics, they prioritized interface simplifications that reduced support tickets by 23% while increasing referral rates . These teams often deprioritize direct customer interviews in favor of scalable data collection methods, though leading organizations like HubSpot combine usage data with automated NPS surveys triggered by specific user actions . CLG organizations institutionalize structured voice-of-customer programs, with product managers spending 30-40% of their time conducting ethnographic research and co-creation workshops . SAP’s UX Engineering team, for instance, embedded product managers in customer operations for weeks to observe real-world ERP usage patterns, leading to workflow redesigns that reduced task completion times by 37% . This hands-on approach extends to beta testing protocols where customers validate solution prototypes against predefined outcome metrics before full development .
Metrics and Success Measurement
The metric portfolio diverges sharply between approaches. PLG teams track product-qualified leads (PQLs), viral coefficient scores, and free-to-paid conversion rates as north star metrics . Heap’s product team famously optimized their knowledge base engagement metrics, discovering that users who viewed three help articles within their first week showed 68% higher retention rates . These metrics feed into growth accounting models that prioritize features likely to move acquisition and activation metrics. CLG organizations measure success through customer-qualified outcomes (CQOs) like ROI realization timelines and solution adoption depth . A CLG product manager at Wildbit redesigned their onboarding process to track how quickly customers achieved their first “value milestone,” correlating 90-day retention improvements of 22% with teams hitting that milestone within 14 days . Enterprise CLG teams often implement outcome scorecards that quantify both quantitative metrics (e.g., process efficiency gains) and qualitative feedback (e.g., stakeholder satisfaction scores) .
Cross-Functional Collaboration
PLG product managers function as growth architects, working closely with growth engineers and UX designers to embed viral mechanics into product experiences . At Slack, product teams collaborate with marketing to create shareable content templates that users can personalize and distribute, directly tying feature development to acquisition goals . This model requires tight integration with data science teams to model the impact of feature changes on viral coefficient and CAC payback periods . CLG product managers operate as customer success enablers, maintaining direct relationships with customer success managers (CSMs) and implementation partners . Salesforce’s CLG teams conduct quarterly business reviews with customers, where product managers present roadmap items directly tied to resolving challenges identified in CSM reports . This approach demands alignment with professional services teams to ensure product capabilities support customized implementation scenarios without creating technical debt .
Adapting to Hybrid Growth Models
Forward-thinking organizations are training product managers in bimodal capability development, enabling them to shift between PLG and CLG paradigms based on product lifecycle stages . Early-stage products might emphasize PLG metrics like PQL velocity, while mature products serving enterprise clients adopt CLG’s outcome-based roadmaps. QuotaPath’s hybrid model provides a blueprint, with product managers using separate pipelines for self-service users (tracking feature adoption) and sales-assisted enterprise clients (tracking outcome achievement timelines) . This duality requires product managers to master both behavioral analytics tools and customer value realization frameworks. The most successful hybrid product managers implement stage-gated development processes where features must demonstrate both PLG-style adoption potential and CLG-aligned outcome impact . A European SaaS company achieved 140% net revenue retention by requiring all new features to pass three gates:
1) User engagement projections from ML models
2) Pilot customer outcome achievement rates
3) Sales team viability assessments for upselling
This approach prevents feature bloat while ensuring alignment with both end-user needs and customer business objectives.
Conclusion
The evolution from single-approach growth strategies to hybrid models reflects the increasing sophistication of both customer expectations and business strategy thinking. While Product-Led Growth offers compelling advantages in terms of initial customer acquisition and cost efficiency, its limitations become apparent as companies seek sustained growth and market expansion. Customer-Led Growth provides the foundation for long-term competitive advantage through superior customer relationships and outcome-focused innovation, but may require different capabilities and approaches for initial market penetration.
The emerging hybrid model represents the most promising path forward for most organizations, combining the efficiency and scalability of PLG with the depth and sustainability of CLG. This approach recognizes that different customers, products, and market situations may require different growth strategies, and that the most successful companies will be those that can effectively orchestrate multiple approaches based on context and customer needs.
Success in implementing either pure or hybrid growth strategies requires careful assessment of product characteristics, customer needs, market dynamics, and organizational capabilities. Companies must resist the temptation to adopt growth strategies simply because they are popular or have worked for other organizations, instead focusing on approaches that align with their unique circumstances and strategic objectives. The future belongs to organizations that can master both product-driven efficiency and customer-driven innovation, creating growth engines that are both scalable and sustainable.
Sales & Marketing is dead, Long live Sales & Marketing (Data driven that is): Customer Lifetime Value
Anytime someone says that they work in a creative field hence they cannot measure the creative output of their work is a concerning statement. I would argue creativity stems because you are trying to drive an outcome. So how do you know that your creative juices actually resulted in the outcome that you wanted?
We don’t have to look far, remember the dot com bubble or the housing bubble? The reason why bubbles happen is because you work under the premise that everything will be rosy and hence you become creative to drive that outcome. You may realize it but the premise of everything being rosy is a constraint, which provides you the basis to operate.
Unfortunately we don’t think about measuring right out of the gate. This is what usually happens, we start down a path to do something, and then stuff happens and suddenly we have the epiphany that we need to track it and measure our progress. By the time you get to the last part you are overwhelmed because the infrastructure to measure your progress becomes an excel spreadsheet and tracking progress becomes a manual and tedious task because results from the various elements of your value chain are stored in different repository and you are out of luck….. Does this sound familiar?
One of my favorite metric in any sales and marketing effort is something known as Customer Lifetime Value (CLV). CLV is a very simple premise what is the value of a customer to your business starting from the time of acquisition to a set amount of years. Now I know that the term lifetime word sounds intimidating because you really don’t know. Which is fine, but in most case using a time horizon of 3 to 5 years usually works.
So the obvious question is how do you calculate customer lifetime value? The elements that make up the calculation of customer lifetime value are as follows:
Acquisition Cost (AC): This basically means what does it take to acquire a set of customers based on various segments etc. The initial cost of acquisition is usually captured in the investment you make in your sales force, advertising, marketing, PPC, etc. initially, to get potential clients in to the funnel. If it takes a lot to get you noticed the first time, you are not alone.
Marginal Profit per Customer (M): If you have dealt with microeconomics you know what this is. If you have not gone through an economics 101, that is fine too. What this is the measure of profit that you continue to add to your user base. This is not just the initial booking, but also the subsequent renewals that you get. You need to know this for the various time slices in your overall time horizon
Probability that the customer will stay (p): Like the measure says this is the probability on whether the customer will stay with you after they have tried your products (switching costs may also be a factor here). In order to derive this number you have to have the something called the churn rate. Churn rate is basically a measure of how many customers are leaving you vs. staying with you. The probability measure is basically (1- the Churn rate).
Discount rate ( r ): This is the rate that you will use to discount future value in terms of current value. In most cases if you are familiar with NPV, you can use the weighted average cost of capital (wacc) as the discount rate
Now there are other factors that I have not included in this blog such as the capability of the product or service in question. For that matter the ability to deliver capabilities quicker and incorporate feedback into product and service quickly etc. These are all elements that can help increase the customer life time value of your product or service. The net is with the arrival of Cloud and Big Data technologies is naïve to think that traditional sales and marketing can survive, data driven sales marketing is the future and it is here to stay now matter how creative you claim to be. Bottom line any creative idea has to be something that is
Measurable
Testable
Try-able
Otherwise you are just making stuff up to make yourself feel important. Which might help you in the short term but long term you need to know what is going on to consistently reward yourself and react to changes in the market place. You can contact me @ kkanakas on twitter with your comments
I don’t know how many times I have heard that question, that is like asking how many times do get acknowledged when you say hello? Sorry to sound to presumptuous here but it would be a wasted conversation because the person asking the question does not understand the web or even does not know what outcome they want to drive and hence ask for a “prescriptive” set of numbers so that they can measure against.
Why is it hard for people to be more outcome driven? Because bounce rate although they are an ok metric, it is contingent upon other factors such as :
Location: If you are targeting a particular geography and you have high bounce rates from sources outside of the geography should you care ?
New vs Returning: This is another factor that you need to consider on the bounce rates. New users are great but if you have a higher rate of people returning then that is a good thing
Device: What are the devices people using to come to your website? If you find a high bounce rate because your site is not mobile optimized.Then you should do something about that
Medium: How are people coming to your site? SEO, Email campaigns, Social media, Paid Search, organic etc. If you break up your traffic this way you will be able to see what are some of the more effective mediums to reach out to your clientele.
All these divisions/ segments are interrelated I guess the net of this blog is that know you what your outcomes are and segment accordingly. Bounce rates are great start if you don’t know web metrics but what you should be really looking at are exit rates (thanks to Avinash Kaushik: http://goo.gl/qjpn0). To me exit rates are more revealing about the leaks in your conversion funnel and what you need to fix.
Another more important metric would be churn rates, similar to exit rates except churn rates focus on the customers you already have. What are you doing to take care of your existing customers and at what rate are they leaving (http://goo.gl/t1ADj).
So when some asks you about what is the ideal bounce rate? Please take the time to educate them and let them understand what outcomes are they trying to drive ( Increase registrations, downloads, donations, buy products etc,)
Caveat: If your company is obsessed about bounce rates, then you have a good inkling that the organization has never thought of the web as a viable channel and you have long road to educate people.
You can contact me @ kkanakas on twitter with your comments
People usually say that Strategists can only think of crazy ideas because they are not the actual “doers” of the work. If they were “doers” then they would not be coming up with such crazy ideas.
I pride myself because I come a technical background myself. Even though I am a strategist myself and I don’t condone strategists that do not have real world experience and coming up with ideas. Actually I have really little respect for such people, because they are mostly people that do not like to upset the apple cart. Since Strategy can be so nebulous, it can be made to appease anyone’s thinking especially if people end up designing a strategy based on the HiPPO rule.
I prefer working with people that have been through the trenches and can empathies with situation of others. Strategist who have history of being the “doers” and getting s*it done are usually the ones that come out on top, everyone else just rides their coat tails.
What you think ?
You can contact me @ kkanakas on twitter with your comments
My first blog after a long summer break, I hope all of you had a safe and sound summer as well. I did catch up on a lot well-deserved reading but somehow my reading list from amazon has not gotten shorter. I bet you if Amazon did a customer lifetime value analysis on me, I think Amazon has probably made quite a pretty penny off of me just on books.
When I wrote the “Jobs to be done” write up on my blog, I did get a few feedback from folks who read it. Some of them mentioned that the “Jobs to be done” notion sounds great but it is mostly theoretical (Cleary some folks have not read Clay Christensen’s Innovator’s solution), because when have to jobs you want get done in real life there are constraints. To which I thought a little bit and realized, and a little inspiration from the book The Fortune at the Bottom of the Pyramid by C.K. Prahalad, that innovation is not limited by constraints but actually happens because of it. With realization I went through the process of retracing my steps on activities which forced me to improvise or bootstrap projects in the past, the reason I had to improvise were because constraints along with a few other things such as effort and risk. Considering these limits in mind I did proceed to execute with a series of actions. I know this sounds trivial because this behavior is so ingrained in us that most of us don’t think twice. So this blog is dedicated to those 3 things that me realize I had not done justice to my earlier blog on “Jobs to be done”.
Constraints
For innovation to happen constraints can come in various forms. These constraints could be the usual suspects like finance/budget, resources, business model at a micro level or these constraints can be imposed at a macro level such as Political, Environmental, Social, or Technological. There is a reason why such decision-making tools exist whether it is the SWOT analysis framework or the PEST analysis framework. These tools allow us to look at the constraint in an objective way and figure out the right course of action. I mean think about if these constraints were not put in place how would we have gotten some of the greatest innovations of our time. These constraints become even more relevant as our economy moves on from a post-industrialized society to knowledge driven society. Just think about the Reinvent the toilet challenge held by the gates foundation with a very simple constraint “it should be useable by 2.5 billion people that do not have access simple, hygienic, and sustainable toilets”.
Effort
Beyond the constraint this is usually the top most thing in our mind. I know it because every time I have been given a project my initial request is always more resources and the answer usually is work with what you have. Because of this limitation, I am forced to improvise and work around ways to get my job done. My usual formula is the get the maximum efficiency with the most minimum amount of effort but it does force me to think in ways that I would not thought in an environment that is more comfortable. That is the other thing comfortable surrounding means bad news to me it means you are going to go stale pretty quickly (that is topic for a blog later)
Risk
This is the other big one. With everything you do there is an element of risk. The only question you have to ask yourself is what is the threshold you and are team can withstand. I know there are plenty of books and magazines that romanticize the notion of risk taking, which sound a hell of lot cooler than saying that before a so called rock star CEO was about embark on a risky proposition he/she was sweating bullets. Which is why I am a big fan of things like continuous integration, delivery, A/B testing, and data driven analysis. All these paradigms help reducing the cone of uncertainity that we know as risk. But with all these tools that we have to help us make better decision a few complimentary tools help us in making the right decisions and they are “Observing people and what they do, and sometimes just plain listening”. Both these non-technical elements that give you ample insight on what you need to do next to innovate (Yes, engaging LinkedIn groups can be a proxy provided that you actually engage in dialog in those groups)
I would like to add a fourth element to this as well (Yes, I know I said 3 things in the blog title, but you folks have not heard from me throughout the summer, so I feel compelled to share with you a little bit more).
Metric
What is the measure of success that people use for the job they want to get done? This dawned on me the other day that in the West, we don’t think about price when we know that a product has a high level of performance and reliability. But if you think about products in the emerging markets, performance is the least of the concerns, their threshold is so low that they want to be able to do basic things at reasonable price. In both these cases you can observe that the metric of success for one constituent is performance whereas for the other constituent it is the price. You can take a performance product and place it a price sensitive market but at best you will skim the market but if you listen to price person you might design a product that could not only work in the emerging markets but also in the rest of world there by creating a new market (this is part is a bonus). The intent of this section to make sure success metric is not forgotten. Too often we get carried away by other things but really do not pay attention to actual metric that will define success for the target constituent. This is something we need to pay attention do and it might just be a statement like “Minimize the time to reinitialize after an emergency to eject thrusters”
Just take a look at what GEis doing on this whole notion of reverse innovation, it really shows that they looking into all 4 things, when it comes to the jobs to be done framework and it’s implementation.
As always I look forward to a very enriching discussion. You can contact me @ kkanakas on twitter with your comments
Unlike my past blog posts this is more of me just being reflective on the way the world has evolved over the past decade. People say the world has changed and I believe that the world has not changed but the medium has changed. Those who don’t understand the medium, well they believe the world has changed.
It is funny that these days traditional companies still view their service to their clients based on products and offerings and ignore the complete “experience”. Yes I know experience is a catch all term but in the context of this blog the term “experience” is the culmination of both product and services.
I will be the first to admit, this is not something new, but if you look around the Internet. You will think everyone has found this new talisman to profitability called “experience” or even better “Delighting your customers”. To me terms like “Delighting your customers” does not mean much, what is more valuable is what can you do for them that will make them look better in the eyes of their clients. That is more meaningful, because you can focus on the kind of jobs you clients want to accomplish.
The web was founded on the principal to allow humankind to collaborate irrespective geographical and political boundaries (it took a while to get there) but it has not changed one thing our innate tendency to be social (matter of fact it has amplified it exponentially). Which is why the power of Web of equalizes the people who consume a service with the people who produce a service. Social computing has now allowed people to be more informed about a product and service and also understand what other people like them think about the “experience” before they commit to such a service themselves.
As most of you know I am very big Apple fan, the reason for that is Apple as a company does not do everything well, but the things that are part of my day to day routine, it does extremely well. Which is why I as a consumer will pay premium for that kind of service. Yes there is a market for a Samsung type client but that is not a demographic that belong too.
What is amazing is that most smaller companies and some big have figured out the engagement aspect of the web and have really created a fan following, where as the rest of the industry is still using the web as an online brochure for their company. In the future companies that will survive are the companies serve their clients well and use the web channel effectively to engage and build a community around them.
There are still companies that still believe that slow and steady wins the race. But unlike in Aesop’s Fables I imagine today’s world there is a big hare competing with 1000’s of tortoises and each tortoise covers piece of the track they are going to race in and they do it really well. By racing like that the hare has already lost the race before it even started because each slow tortoise is a specialist in a micro conversion (i.e. each segment) which all work together in the context of the macro conversion (i.e. win the race).
Companies of the future will all have passionate user base and community. They will have a 1000 tortoises racing and that will enable a more fluid and complete experience against the bigger hare (unless the hare come forward with a 1000’s hares themselves).They will value more what each of their peers has to say instead of “vendor speak”. They will focus and engaging rather just being consumers.
So the net is nothing has changed except the medium ….. and some are just figuring that out You can contact me @ kkanakas on twitter with your comments
I know I am not an entrepreneur but I do know a thing or 2 about intra-preneurship. Working in technology company, every now and then you come across new cool things. Being product manager in my prior incarnation, I have been called a buzz kill when it came to taking out the “coolness” from the shiny new thing (Although I must confess I do enjoy working with cool things too).
When I am look at cool technology especially since I am in the business of selling software. I have to ask myself the following questions:
Does this new solution or cool technology solve a pressing problem?
Is the problem big enough that a potential customer is willing to pay for it ?
Does the opportunity match with my ability or my teams ability to deliver a solution?
Are the profits worth taking the risks?
Granted that one cannot be a complete expert in everything but that is where your ability to research comes in and I am not talking about going on the internet and searching on the topic. The internet is one of the few tools in your quiver that you use.
The first thing you need to do is a frame the problem by asking yourself the following question:
What is the problem you are intending to solve ?
By answering that question you have identified the problem area/s you are going to research (It is critical for any venture actually_ . Once you have identified the problem then these are the following 3 areas that I would look at to evaluate the opportunity further:
1 – Meeting with Clients about a potential problem to be solved
Clients will tell you what their specific problems they are facing without even prompting and also the jobs they want to get done. Some might go to the extent on how you should help them to get their job done. To me clients are a great source innovation. Now if you believe the Henry Ford’s old adage (which I do) “If I had asked my clients what did they want ? They would have said faster horses”. But when working with your client base, the framing of the question needs to be different instead of asking them the opportunity problem ask them the kind of work they are trying to accomplish. You may find some surprising inputs that might validate the opportunity at hand. Too many people expect their clients to just get it and understand the problem space they are going after or intend to go after.
2 – Meet with your Business Partners and Sales force
Both of these constituents are hungry to look at new opportunities and they are usually one of the few sources of validation. Business partners are useful because their business depends on you being successful and they also have access to first hand knowledge of why they are being employed by your clientele.
Your sales force is the other constituent (if you don’t have a sales force then you should go back to doing #1). Sales always wants to win and as they should. They are one of the strongest advocates of your products/solutions and they would be first one to let you know why they are losing on certain opportunities
3 – Internet based 3rd party research
The internet is truly a boon to doing tertiary research. You can get access to papers written by some well established analyst at a large analyst firm or you can take the simple route of trolling websites where your potential user base gets together to exchange and share ideas. I would go as far to say that trolling forums is just as effective as reading up on analyst papers (there is an art to it, but it can be done). It is called social listening. What do I mean by social listening ? Well in the “internet of things” there are congregations of people in the virtual world building relationships especially on forums like “Linkedn” or even “Twitter” for that matter. Sometimes, all you have to do is join the right group or follow the right hashtag and you can get your answer/validation of the opportunity at hand. The analyst paper will probably give you a better idea of the market size but these two efforts combined provide a winning combination.
Let me assure you these are not fool proof activities and sometimes no matter how much research you do you may deliver a dud sometimes (just do it fast enough, so that you can course correct early on).
What are some of your ways to research an opportunity ? Appreciate any insight you can provide. You can contact me @ kkanakas on twitter with your comments
I am big a fan of Spreecast, but this topic is something that is close to my heart. Some insights on how to implement a business idea and get it going.
