Profit is essential because, without profit, a business is unsustainable. The problem is that while there is lots of guidance on pricing regular goods and services, there is little guidance on how to design profitable software-enabled solutions – until now.
Product Managers guiding the creation of software-enabled solutions need to be aware of the Solution Lifecycle, a model covering all stages of a software-enabled solution, from idea to release to decommissioning. Knowing your location and leveraging opportunities at every stage can improve profitability. Ignoring it risks mistakes, delays, and missed opportunities. Register now for this episode of the Product Management Minute on September 1, at 1:30 pm ET to save your spot and receive the recording.
Attend if you want to:
Learn about the relationship between adoption categories and pricing strategies that improve profitability
Hear how companies have used the Solution Lifecycle to raise prices
Gain insights from Jason and Carlton as they answer audience questions about how Solution Lifecycle knowledge can help Product Managers improve the success of their product
Everyone can find 15 minutes a week to learn something valuable. This series, the Product Management Minute, gives Jason Tanner and Carlton Nettleton the opportunity to talk about essential topics for Product Managers who guide the development of software enabled solutions. The topics and ideas they discuss come directly from questions and feedback we hear from students and graduates of the Profitable Software Academy, an Applied Frameworks program supporting the professional development of product managers at all career levels.
About Jason Tanner
Jason is the CEO of Applied Frameworks, author of Software Profit Streams™ A Guide to Designing a Sustainably Profitable Business, and an instructor in the Profitable Software Academy, delivering timely, high-impact support for our largest clients who have hundreds of members of the academy learning the latest approaches to building profitable solutions.
About Carlton Nettleton
Carlton is the SVP of Product at Applied Frameworks and a Certified Scrum Trainer recognized for designing engaging courses for professionals building amazing Software Enabled Solutions across multiple industries. As an instructor in the Profitable Software Academy, he has a front row seat in helping participants tackle all the tricky but energizing problems product managers face as they guide the development of the solutions they manage.
Laura Caldie 00:03
Hello, everybody. Hi, Carlton. Hi, Jason.
Carlton Nettleton 00:06
How are you doing today?
Laura Caldie 00:07
Good. I think we're all doing great. It's a Friday, and it's right before a long weekend. And whats a better time to talk about the solution lifecycle.
Carlton Nettleton 00:16
Yeah, why not? Friday, we're hanging out who's talking about solution lifecycle?
Laura Caldie 00:26
All right, well, it's supposed to be the product management minute. So let's see if we can get an even more, more concise, and we've done in the past. Yeah, so I just like to tee this up, because not everyone watches every recording, but I'm going to be super fast, you know, the product management function, that career that that department, I think, has lives in incredibly complicated life. And that's why we built the profitable software Academy. And that's why Carlton and Jason have been working on creating some really amazing content to support that role. And when you're collaborating with all of these different parts of an organization in order to create a profitable software solution, there's a lot of complexity to that. So I love this product management minute, because people like Carlton and Jason get to talk about things that sometimes feel really hard and find a way to make it a little bit easier and a little bit more impactful for the organization and for the product management folks who have to do this kind of work. So the PSA is where you spend a lot of your time, I know you both Build Content and work with students. And so I think part of what makes these topics interesting is you can bring some insights from the companies that you're working with and the students are working with around where the benefits are, what might be hard, and what are some of the tips to be more effective. So with that, I'm going to turn this over to both of you to talk about the topic at hand. And of course, if anyone has any questions, I'll be looking at both chat and the q&a. So feel free to interject them. And we'll make sure we have time to answer some questions as well. All right, the solution lifecycle, take it away.
Carlton Nettleton 02:07
All right. All right. Let's go to the next slide. This picture here has a summary of the solution lifecycle. In previous session, I think people were talking about industry lifecycle. And so what we see here is, on the left, you see the new solution development, right, then you have launch, and then you have the classic S shaped adoption curve. And unlike kind of the industry lifecycle, which talks about the creation, and the growth, and maturation decline of a collection of companies in a big market, right, the solution lifecycle talks about the development, the launch, the growth, maturation, decline of one solution within an entire market, right. And there's a couple things, you just see this diagram that we want to share with you. And I like this diagram, because when for so much first showed it to me, I was like, Oh, now I have a way to understand how the solution evolves and grows over time. And what I like about this diagram is two things. Number one, you go from left to right, right, there's no way you can't go back and re develop new solution development, right. And as you progress through these different categories of adopters, right? You can't you can't go back to your innovators, right, your products growing, it's grating, growth and traction in the market. And so as you move through innovators, you go to the early adopters, early majority, the late majority, and the laggards. That's one thing. So you go from left to right. The other thing I want to add here is that each of these categories here have some durable traits that you can live leverage as a product manager, right. And a couple notes here, you see, right, they're organized in normal distribution. So innovators, and laggards are typically going to be a little bit smaller, and the bigger chunk are going to be those early majority and late join j. So when you want to add
Jason Tanner 03:56
I think the key here is that we think about these customers at different stages in different ways. So there is a segment of people who are innovators who self identify, and really are happy to really try anything. And particularly when you have relationships with MCs, you should think about as a product manager who in your network, would you characterize as innovators that they're always thinking about and talking about the new thing, because they are the people that can help you network to other innovators. So we're gonna think about the launch. In fact, we're going through this right now with our own launch of Horizon platform. We do notice that there's these innovators that know us, they like us from the past, they trust us and they're willing to help us get started, and more importantly, to providing us feedback to help us improve the product as we then pursue the early adopters. So we're really going to be critical and as objective as possible about where are we on this lifecycle to identify our opportunities? What would it take for us to transition from early adopter into the early majority what is a set of features and benefits that we can offer to improve the solution to get us to the next stage and the next stage beyond that.
Carlton Nettleton 05:08
Yeah, no, go ahead. First, I
Laura Caldie 05:11
was just gonna say I would add that it's interesting to also note that, you know, we're small, but we do have more than one solution that we've been working on over the course of what 15 years of the company has been around. So who is right now kind of rising up as, hey, I'm an innovator here, I really want to work with you on Horizon. And this early platform may not have been innovators in another category of solution that we may have been working with or intersecting within the past. Right. So depending on the problem you're solving, a company may deliver innovators to you or they may not depending on what it is that you're like it, they're not always the same, they don't stay the same, right? Sometimes, you know, the your product is appealing to somebody who's identified as an innovator, but in another category, they may not be.
Carlton Nettleton 05:59
Well, right. And I think of some solutions that we have right now, were probably more like late majority and laggards, that the that the consumers of those solutions that we're providing to the market, the people there are more, they have the traits that are associated with perhaps late majority and laggards. And, and that's okay, right? Because in a healthy portfolio, right, a product manager is going to have different solutions at different parts of the solution lifecycle. And you just have to be aware of that as a product manager, like, hey, this solution, we're talking about late majority early majority, this solution here that's newer, it's more focused on innovators and early adopters, and maybe product managers need different skill sets to be able to interact with these types of consumers, as well. So someone who might be really good at dealing with innovators may not be the best product manager to interact with someone in the late majority, potentially. Let's go to the next slide. I wanted to kind of share with you a little bit more about who these people are. And I wanted to use a little bit of imagery, because we throw around these terms, innovators, early adopters, et cetera, like, what do we really mean when we talk about these people? So the innovators, I think Jason mentioned first to adopt open minded, independent, curious free thinkers, they are looking for technology, or software enabled solutions that give them a competitive advantage. And they, you know, because they're innovators, they're networked. And they want to help you, as a product manager work with your solution to make it better. Right. One of the things also is interesting about innovators, they have a lot of tolerance for risk. So it doesn't have to be just perfect for an innovator. Right, because they're okay with it being a little rough and around the edges. Next, we kind of have the early adopters, they're similar to innovators, right? Open minded, enjoy technology, looking for competitive advantages, right. But for the early adopters, they're not as risk tolerant as the innovators, right? So they want to see a little bit of data to help justify their choices that, hey, you know what your solution is going to help me solve my needs. The other thing that's interesting about early adopters is that they are very much networked, like innovators, but they're using their network kind of to create community and feel like a part of something bigger. And these kinds of psychological traits are really important to keep in, keep in mind when you're working with innovators and early adopters, right, they have some distinctness similarities, but also some distinctness. Jason, you want to add anything about innovators early adopters, before we go to? All right. If we take next for our early majority, these are the folks that you need as a product manager to build that sustainable and scalable business model. Right. And we have the early majority is that shift from that independent, open minded free thinkers, to more a pragmatic, risk averse consumer, right. And these folks want high quality solutions that solve their most pressing problems. But what they're looking for is practical solutions. They're looking for reliable solutions, and they're looking for solutions that are high quality. We'll talk a little bit later about the chasm because there's a chasm between the early adopters and early majority. But let's just let's just say, hey, you know, there's this transition from early adopters early majority. Next up, we have the late majority, right, and the late majority are your most skeptical, risk averse and price sensitive consumers. Right? These are what I would say your traditional mass market, right? And when they want a solution, what they're looking for are durable solutions, much like the early majority, they want pragmatic durable solutions high quality But what they're looking for are solutions that come from stable and mature providers. Right. And then finally we have the laggards. These are the folks that are most resistant to change. They only adopt solutions when required, either when a solution is Sunset, or maybe there's some sort of regulatory requirement that says, hey, you absolutely have to upgrade your solution. And I, like Laura mentioned earlier that sometimes people might be in one category of a solution, right? They might be early adopters, but in other categories, they're laggards for me like with certain home technology, I am like a laggard, I do not adopt a lot of new technology in the house. I wait until it's very proven, I'm caught somewhat price sensitive, which is interesting, because I work in tech. So anything here just Laura was great
Jason Tanner 10:53
over? You know,
Laura Caldie 10:55
I do have a question that I'm wondering if you're going to talk about also in the next slide, but it's it's like, no, in what way does the category of customer that you're talking to affect your choices around changing pricing and licensing, like if you have innovators, and you're working with them early on, and you're testing business models, and things like that, is are you doing it more frequently, or as you know, I know, we always tell people, you should be reviewing pricing and packaging, at least annual basis. But it's there, depending on who you're working with. How does that impact your packaging and pricing view and those conduct cadence and that cycle
Jason Tanner 11:39
effect to drive adoption, you create special limited offers through policies and fences for different demographics based on how you segment the market, in the early stages. So you may see more opportunities to attract early adopters, through special offers and much less. So when you get to the early majority, by the time you hit the early majority want to be more stable, and much more clearer with your pricing and packaging, so that the early majority segments can self identify which offering they should select. So let me say it another way, I do not want to underprice my solution so that an enterprise customer pays less than what they would be willing to pay for the same solution offered to a small business who's going to pay much less. And it's a big mistake a lot of companies make you try to find a homogeneous price level, that does not actually give them the maximum profitability across these very different segments who have very different needs, and are willing to pay very different price levels for the solution. So the mentality of of reaching that those different people and as different segments as we regressors solution lifecycle does change, particularly when you have a more mature solution, start hitting the late majority as you add more features, two options. One is I can think about elevating my price, because now I'm offering even more value, or should I offer that new feature, that new capability is a profit engine. This is an additional expense, this purchase solution, but it's optional. It's gonna drive additional profitability as a profit engine.
Carlton Nettleton 13:24
Yeah, no, that's good point, Jason. Because if we go the next slide, Laura, we talk about that, like four tips, right, which is maybe time the major releases of your solution to coincide with some of these transitions, right. And so we have these transition points. And in these transition points, we may rethink about the pricing and packaging, right. A couple points tips here that I wanted to just emphasize here. The first one is really obvious, know where you are in the cycle. But it's not a precise thing where you count up the number of customers. So you have this normal distribution, right? You can't just count people can't count it. Right. But you have to have a general sense of Hey, are we dealing with mostly innovators? Are we dealing with early adopters, early majority, late majority are bikers, right? And the way that you know, this is kind of the product managers talk to customers. Right? That's key thing. Number two position and package your solution that way that appeals to the targeted category of adopters. So for instance, I think I mentioned earlier, that are innovators like rough and incomplete solutions. And the reason you might ask, Well, why would someone want this right? Because they want to make it better. That's part of the profile of an innovator. They want to say they want to be part of helping you grow that solution and make it better. You bring a rough and incomplete solution to the late majority are a laggard. Yeah, they're not going to like that at all. Right? And so you've got to think about the way that you position your packages, how you do the pricing. thinking, right? Think about the late majority of the most price sensitive, they weren't really easy to understand pricing, early adopters, they might be more flexible. Right? So you got to think about these cyclists, durable traits associated with these categories. And then last thing I wanna say is the, the chasm. Right. And the chasm is that gap between the early adopters and early majority. And it was first, the term was first coined by Geoffrey Moore wrote a very famous book called Crossing the Chasm. And I've heard someone describe the chasm as the place where good products go to die. Right. And it's it is the idea that transition between your early adopters and early majority was most dangerous for a product. Because you've got to figure out how to position and package the solution and price it in such a way that it appeals to a sustainable market. And what appeals to appeal to your innovators and early adopters isn't necessarily what's going to appeal to the early majority. And this is why products and teams products don't exit the chasm, because people can't make that transition fast enough. And Laura, when she was reviewing this reminded me, like, don't forget about the power of intangible benefits, and intangible benefits are are those benefits that you can offer related to brand, aesthetics, security, and even fun factor if it's relevant to your solution? So when you're thinking about trying to cross the chasm, yes, absolutely. Emphasize tangible benefits, that's what the early majority wants, but they want other things as well, the intangible benefits.
Laura Caldie 16:46
Jason, one of the things that I was thinking about about around the intangible benefits is, you know, we're talking about the profile of the innovator, one of the intangible benefits is to be able to guide the evolution of a new product, right to be part of the team that's building something brand new. And the that excitement you get is the intangible benefit for some people who want to join you early on in the development of a product, there's a counter intangible benefit to that. And if you don't capture that, as a product manager, when you're talking to the early majority, if you still sound like you're talking to people who get really excited about, you know, leading and guiding, that could contribute to difficulties Crossing the Chasm. And I'm just wondering if there are any other coins like that, Jason, that you can think of where what really works for innovators is what you need to really adjust in your messaging, when you're talking to the early majority. Security might be another one actually, as I say it,
Jason Tanner 17:46
I think that the the ease of use, the ease of onboarding is dramatically different. Once you get the early majority, I think that's one of the keys is that it is infinitely easier for the solution to be adopted by the early and late majority than ever is with the innovators, or visionaries of the early adopters, that they're more willing to put up with a little bit of friction than you will with the with the early and late majority. So I think that that chasm is, can be avoided in lots of ways. One is by making the experience as seamless as possible for somebody to begin using the solution. I will add, I actually believe in in counting the numbers, I actually do think that the awareness of knowing where you are actually is a number, I think that there's definitely knowing the number of customers you have and the total addressable market, and the total addressable market that you can actually serve based on the size of your sales and channel sales partners, whatever those may be. And I think we often discount those a bit, saying, Well, I only have so many direct sales, I'm going to sell through the web, I'm gonna send through self through referrals, but there's also channels. And when we think about that bigger scope of who we can actually reach. Now we have numbers, and we can roughly go with somewhere between 90 and 10%. are the innovators roughly 10 to 50%, early adopters, maybe 15 20%, on the early majority, to get a sense of well, where am I I've got a total addressable market of 500,000. And I'm right around 100 100,000 customers right now. Now I know where I am in the lifecycle. Of course, there's numbers change, but we want to be aware of it. That's all part of this knowing knowing the market is essential for the product manager, whether the product managers coming up with those numbers or working with marketing, or even advisors when when I was a software product manager, we partner with Gartner and Gartner had tons of data that we would use very carefully to understand who are we actually going to be able to reach and that then led to now we can uncover who sales can go engage to really promote the solution.
Carlton Nettleton 20:03
That's a good insight. Jason, I hadn't thought about that. Thank you for sharing that. I mean, right. It sounds it sounds simple, right? That's, I think, why I overlooked it.
Jason Tanner 20:13
Well, and again, I did write the book and content in the book with Luke. So I've thought a lot about this. So fair enough.
Laura Caldie 20:21
Well, at least you haven't forgotten everything you've written, right. All right. Well, we're about at the end of the time, but we're going to talk about Vision Next time on September 15. So look out for an invitation for that. And go to our website, we've got some really great resources, not just about product management, but about how to more generally approach the development of sustainably profitable software. So I think we've gotten nuggets, and we've got some deeper dives into these topics. And if anyone has questions about any of it, we're always available to talk. We I keep mentioning that that Carlton, and Jason and others on our team are part of the development of the profitable software Academy. It's this really fantastic education program for building product managers at all levels. So if anyone on the call is interested in talking a little bit more about that, there's how you can reach me. I'd love to love to hear your questions. Any parting words Carlton, or Jason?
Jason Tanner 21:15
Thanks for hosting. Yeah,
Carlton Nettleton 21:17
I'm all good. Thank you.
Laura Caldie 21:18
Excellent. Have a nice weekend. You too.
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