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  • Writer's pictureJohn Bowie

The Shareholder Is Always Right?

“The customer is always right” was the very first business maxim. It’s so old no one can remember who said it, but for decades companies from local gas stations to multinational conglomerates have placed it at the center of their mission statements.

Sadly, “the customer is always right” has given way to “the shareholder is always right.” The modern mission statement centers on meeting or beating shareholders’ expectations – at the expense, if necessary, of employees, of customers, and of company values. Every decision is evaluated for its impact on the bottom line; customers are not even a consideration – they are simply sources of revenue. Today when an employee wants to solve a customer problem, she has to show a return-on-investment.

How do these new business priorities affect product development? Like everything else, product success is measured in terms of financial objectives – profit margin and market share – the factors that drive the stock price.

While profit margin and market share are often used to measure the success of a product, they do not determinesuccess. Companies cannot design profit or engineer market share; they can only design and engineer products. So what are the ingredients that must be mixed into a product design to ensure its success?

Conventional wisdom says reliability, features, and price determine product success. Reliability reduces support costs, which increases profit. A rich feature set entices customers to buy, which grows market share. And a competitive price means customers receive good value for their money, which improves brand loyalty.

Reliable. Rich in features. Low in price. Combine these ingredients and surely your product will succeed.

Or will it? Is it possible to design a product that is highly reliable, rich in features, and low in price – but still fails? You know it is. So, what is the missing ingredient that completes the recipe for success?

To answer this question, think of a successful product, a Sony TV for example. Sony televisions enjoy all the trappings of success: excellent market share, high profit margins, and loyal customers. Now imagine that Sony releases a new line of UHD TVs. These new TVs include all the functionality of previous models, exceed Sony’s reliability standards, sell for less than their predecessors, and offer better picture quality.

Now imagine that just before release, some mischievous product developer secretly reassigns every TV function to a different button on the remote. So now when the customer presses the volume up button, the TV turns off. Pressing the channel down button adjusts the color setting. Pressing 14 changes the channel to 28. And so on.

Would this new line of Sony TVs succeed? Let’s apply our success formula:

Reliability? Check.

Rich feature set? Check.

Low price? Check.

This new line of TVs has all the attributes of earlier models; they’ve just moved things around a bit. Why then is this TV line destined to fail?

The answer is obvious. The new TVs just don’t work. Or more precisely, customers don’t work with them. Customers will quickly realize their new TV is useless, and off they will go to the store for a refund. Reliability, a rich feature set, and low cost are clearly not sufficient to ensure a product’s success.

So, returning to our question: what is the missing ingredient that completes the recipe for a successful product? The answer: results.

Success is not defined in terms of what your product can do, but in terms of what your customers can do with your product. Reliability, functionality, and price are important, but they are all meaningless if your customer can’t achieve results.

Your product, by itself, can’t accomplish anything. It just sits there. It’s useless. It may have great potential, but unless your customers can figure out which buttons to push and when to push them, the product might as well stay in the box.

I want you to create a poster containing the following words. I want you to post it in your office/cubicle and read it every day. I want you to send a copy to your CEO. The poster reads:

Our company cannot succeed unless our customers do

Take a minute to think about what this means:

  1. Technical Excellence is Not Enough. It doesn’t matter how many features your product has or how technically superior it is. If your customers cannot use these technically superior features without a lot of hassle, the product will fail and so will you.

  2. An Elegant Design is Not Enough. Any product can seduce a customer with an appealing and distinctive design. But the allure of beauty fades quickly when the product’s ugly and demanding behavior begins to show.

  3. Creative Marketing is Not Enough. Slick marketing and false promises can sell even lousy products for a while, but eventually reality catches up with the hype. Your company’s reputation will be irreparably damaged.

So, what is enough? It’s very simple: deliver on your promises. Every product promises results; deliver those results, and make sure they come easily. Make this your #1 objective. Take a leap of faith: focus on ensuring that your customers achieve their Job 1 objectives and have faith that your business objectives will follow. Business results flow from customer results, the reverse is rarely true.

Taking care of business means taking care of customers. If your product requires its customers to know things they don’t want to know and do things they don’t want to do, you are in a very precarious position. Your support costs and product returns will be high; your customer loyalty will be low. You’ve also wasted your R&D investment developing features that no one uses. But don’t despair. Very soon you’ll learn how to pinpoint where your product fails, why it fails, and how to make it work.

And your customers – and even your shareholders – will love you for it.

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