Zero

zeroNot all successful products developed by your company should sell in the market and make money. They may well help a commercial product to be successful and pull away from the competition. And the way a product manager often runs with that product is to make it applicable for more than one commercial product. I’ll offer two examples.

Feedback. In the era of web-products, collecting user feedback has become easy. But isn’t it surprising how few products actually do it (and amongst those that do, how many actually listen?)? Your company has this enterprising spark who decides to build a feedback system for you to plug into your product as it is shipped to the market. Zero revenue from the feedback product – imagine how much better the mainstream commercial product becomes with this “zero-addition”.

User Behavior. Leads back to a question Seth Godin asks – “what are your assets”? A vastly underrated, yet not so difficult to collect, is user behavior. What does the user do after she has logged into your system. Okay – if it is sensitive I do not want to know the queries she fired, but which pages did she go to and in what sequence? Were there aborted attempts at some functionality? Did she purchase something or did not purchase something that she indicated she would? Imagine the value of this asset when laced up with predictive analytics and product/website improvement ideas that come from mining the behavior content. Standalone revenue of this “user behavior” product – zero.

Product Managers are very often wired for thinking hard dollars, marketing, Product P&L and the like. The lemming that ran against the others had a terribly difficult time and a very different mindset. To build such “zero-revenue” products you would need that.

Image courtesy: Prerido Zero blog

Everybody Hates Lumpy

Every business hates lumpy revenues. Volatility in revenues translate to volatility in profitability and a consequent increase in earnings risk. But shit happens, and so does lumpy revenues. Especially when a firm’s business model is such or its customer base is not diversified enough. Take a firm that generates company reports for investors and get’s paid by the output (terrible mechanism of compensation, but we’ll deal with this later). Outputs are invariably high during earning season. Now imagine a technology company that provides a SaaS based platform for our research company to facilitate data analysis, authoring and distribution. The revenue of this second firm will be just as lumpy – and synchronizedly so – with that of the first one. Is there a way out?

To my mind SaaS platforms will have to get multi-tenanted. This allows the platform to hedge away risks on a portfolio basis and also benefit from revenue diversification models of the individual tenants (of course so long as the activities under diversification happens on the same platform). Builders of SaaS platforms have to cautious how much non-generic functionality it builds into it. Staying with the research platform example, the vendor would want to not build asset class specific features exclusively and stick to just research (as opposed to say “Equity Research”). Client/Industry specific features and functionality will invariable tie revenue fortunes at the hip.

Lumpy there, lumpy here.