Product Managers tell us that quantifying value for Software Enabled Solutions can be really tricky. However, understanding value is the foundation for guiding the growth of a profitable solution and standing out from the competition. Join Applied Frameworks Laura Caldie, as she discusses this topic with the instructors of the Profitable Software Academy, Jason Tanner and Carlton Nettleton. The first episode of the Product Management Minute was recorded live on June 23, 2023, they discussed challenges and tips for quantifying value for Software Enabled solutions.
About the Series
Jason Tanner and Carlton Nettleton dive quickly into product management topics in this series of short, immediately useful webinars. Topics discussed come directly from the feedback we hear from graduates of the Profitable Software Academy, a program supporting the professional development of product managers at all levels of their careers.
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.
Transcript
*Transcribed using ai. Please excuse spelling and grammar errors
Laura Caldie 00:52
Hi, there, Jason. Hi, Carlton. How are you all doing today?
Carlton Nettleton 02:57
I’m doing great. Thanks. for asking.
Laura Caldie 03:00
I hear the short and snappy “great” from Jason as well.
Jason Tanner 03:04
Great. It’s Friday. I’m looking forward to the weekend
Laura Caldie 03:07
Yeah, well, this topic I think is well, I know the three of us have an awful lot of passion around this about trying to figure out the value of a software enabled solution because obviously, that unlocks so many things and including just ultimate goal for a lot of product teams is how profitable is my solution.
So for the folks who are joining, this is a first in a long series we hope to run over the coming months we want to keep it short and snappy, because everyone is super busy. And so the title is definitely leading to the duration, right? We want to keep this really quick and everyone can find 15 minutes is my theory in life right now. So this is the first of our attempt to prove that true. So welcome Jason Tanner and Carlton Nettleton. Jason is the leader of Applied Frameworks and had many, many years of experience in the product management boots, so to speak, and Carlton leads product management for our product team. So both of them are also instructors. So if you want to switch to the next slide, Jason, I think part of why we’re so excited to talk about this is based on the product manager role. I think we would all argue Product Managers have one of the most exciting jobs in an organization that builds software. People do it because, well we all know product managers love a bit of control, but I think the other half of it is that you know, you really want to build something that’s powerful and solves problems and get into the hands of a customer. So there’s this passion around like, Hey, I get to control the idea that I’m going to build something that people love. So, you know for from our perspective, it’s also a super hard job because the product management team has to collaborate across the organization and even outside with customers and stakeholders. This environment that you will have to operate in is really complicated. So imagine being a control freak and looking at this is where I need to collaborate because I’m not in charge of everything. I actually need to collaborate with my teams and my stakeholders and the rest of my company in order to make something that’s successful. So I think this is kind of the the environment that we’re operating in and why we wanted to start to unpack some of these smaller topics and bring value to the people on the webinar. So Jason and Carlton are both content designers and instructors in our profitable software Academy. And every time we get together and talk they have awesome stories and insights that come from the students that are enrolled in this program. And I thought this is fodder for everybody else. So the profitable software Academy is really focused on helping companies address these knowledge gaps. We hear all the time that there’s not a common vocabulary or a common toolkit that the product management teams are using. That’s really what the Profitable Software Academy is designed to solve. But we get to hear from the instructors and designers about well, what are students struggling with and what do you think are some really important tips and topics that you’d like to talk about in this webinar series? So with that, let’s turn it over to Jason and Carlton to talk about quantifying value.
Jason Tanner 06:16
Yes. Why is it so hard? Carlton? You know, all the answers, right?
Carlton Nettleton 06:37
I know a lot of the answers. I guess the challenge is what you have right here, right? How do we define value? That’s one of the things that I think is really difficult when you’re a product managers where what’s your definition?
Jason Tanner 06:16
Right. So this is from our software prophecies about can we spend a lot of time thinking about this and talking about it and editing it, which is surprising since it’s such a short sentence. But the reality is when it comes down to it, the value is absolutely based on benefits. Customers receive less they’re total cost of ownership, which includes the price of the solution, any of the costs to use a solution any additional costs, like power to run a server, or if I’m in the cloud. AWS costs if I’m installing use a solution myself. I mean, there’s a whole lot of other costs, but I think they’re key that we really zeroing in is on benefits and the Agile community has done a lot of great things. One thing that we’ve been a bit messy with is value. We talked about value alive and talking about business value. And we talked about value in our user stories, but really nailing value is the hard part. Which really is something I think we want to help with as we go through the rest of our time together. So let’s start with benefits from fruit if our definition of value is predicated on the benefits of customer receive tangible and intangible benefits are the drivers. So the tangible benefits tend to be pretty straightforward. So when we think about tangible benefits, and again, this is right from the book, we’re thinking about all of the hard object to direct benefits that are that are very easily explainable and observable. Carlton, how does that affect how you think about benefits when I think about the tangible benefits?
Carlton Nettleton 08:23
I think about the tangible benefits, I think about them kind of in two categories, right, which is this idea of how can we understand what is important to the customer that will is somewhat measurable, right and for many solute solutions, it comes down to two things. Are we cutting costs, right or are we increasing revenues? And those things are objective. They’re direct, and they are hard in the sense that we can pretty easily quantify them.
Jason Tanner 08:59
Right? Right. Now, the intangible benefits, I think, are the benefits that are often neglected in some ways. In fact, I think one opportunity we’re seeing a lot with our Academy, students and product managers in the programs is that we severely discount and underestimate the value of intangible benefits. Even though they’re soft, or subjective and indirect, they can be quite powerful. And we’re gonna talk a little bit more in detail about these intangible benefits as we go through this. So when we think about the tangible benefits, we really came up with verbs that modify the dimension of value. So whatever is relevant to your customer, I want to reduce my costs. I want to increase my revenue. It really comes down to as Carlton mentioned, the objective so we’re looking to reduce the costs. Other things we want to reduce and this is not the entire list or reduce the risk. I want to reduce my effort make this easier for me. One argument for QuickBooks, for example, is that it’s going to be easier. We’re working with a big group of students right now. They want to make it easier for people to get orders refill. And that really just makes it easy. I don’t wanna have to call anybody I want to do it right from my phone. And if there’s any type of friction in the process, it needs to be removed, and that is valuable. Similarly, when we think about increasing, again, we want to increase revenue productivity. are more options. I want to make it more accurate, so increase the accuracy of my report. All of those are the types of tangible benefits. So I said that we severely underestimate the power of our intangible benefits. So that’s really what I want to emphasize next is all of the intangibles starting with a really strong one. Let’s make it safer. Is there a way to quantify that?
Carlton Nettleton 11:22
Yeah, I know I was I was thinking about that when you thought about increased safety. You know, one of the things I think is just in general like it doesn’t you don’t get hurt or harmed using it or there’s, you know, the number of times the solution might not break.
Laura Caldie 11:43
I can’t tell you that I’m just going to jump in here because that one always speaks to me. I can’t tell you the number of times that I’ve made a software or hardware purchase specifically because of this. Like I’ve spent way more money on a particular solution around identity protection than another software because I believed that the identity protection I’d have a different solution was much better and therefore increasing my financial and personal safety. So I think that one is something that if your product incorporates anything around safety, not to discount the value of that for people in what they’re willing to pay.
Jason Tanner 12:20
And that’s exactly the point. So we think about quantifying the value. There is a mindset that we can adopt where even though we can’t put a number on it. The qualitative intangible benefits benefit of the increase in safety will affect the purchase decision and elevate the value of the solution as a number. So we think about pricing and the system of pricing. It’s not just a number it evolves from the series of choices we make about how we want to build the relationship with the customer. How will they actually pay for the solution? How do they exchange value to achieve their benefits? What are all the drivers of that decision that lead to the number safety’s a part of it? You know, just like security, and just like decreasing anxiety, I don’t want to feel anxious. I want to feel like hey, this is this has given me peace of mind. We hear that a lot. I have the peace of mind that I’m doing the right thing when I’m using a solution. I have more confidence all these build up to be part of how we will eventually quantify the full value to solution. As well as reducing stress. Brand is powerful confidence in the brand and we invest a lot in marketing. We got to think about it are we showing up with a brand to actually is contributing to the overall value of our solution. So all of these intangible benefits when we actually look at all of the benefits our customers are telling us about that they are going to expect to receive or do receive from an existing solution. Knowing is okay if we add all this up all these value statements together now we add to the overall value of the solution.
Laura Caldie 14:08
Jason, I just want to add one other question in here for you. I’ve heard you say before that product managers will sometimes focus too heavily on features. And I think oftentimes features don’t necessarily express these intangible benefits. It’s not a single feature that does it oftentimes it’s the overall I don’t know the it’s a bigger piece of value that may not be relied to or tied to a single feature. And and yet that’s why people like me will spend twice as much money on something. It’s not the feature that’s making me do it. It’s the confidence in the safety or the security that made me spend the money.
Jason Tanner 14:51
So when and I’ve been guilty of it too. We actually had a conversation about this morning we think about the customer pain point of it cost too much to solve the problem without the solution. If I had a better solution, I could raise my revenue, again does tangible benefits. Same with if I’m looking for the peace of mind from the solution. Well when we think about all those pain points the goals aspirations of the customer, the expected gains and the jobs that are doing and help them do their job better and more effectively. When we think about features, we’re really good at describing the features. So we’d like to talk that way we talked about with the team. We spend a lot of time talking about the requirements and the user stories and use cases and we’re actually talking to the customer, we need to knock off every one of their pain points. Here’s the feature. Here’s how it removes your pain. Here’s the feature. Here’s how it’s gonna help you do your job better, more effectively, faster. Each that one two combination is really what’s going to pull people to make a decision about purchasing the solution.
Carlton Nettleton 15:59
You know what I was thinking about all this in this conversation was it’s not necessarily it’s the collection of features in the package, right? That come together and bring in these intangible benefits to me.
Jason Tanner 16:14
We’ll make a pretty strong statement in the book, a feature that doesn’t deliver customer benefits isn’t actually a feature. So one framework we use to really understand the benefits so we can identify and quantify the value is our benefit cards. Carlton, you want to walk through this?
Carlton Nettleton
So this is a nice framework that we created recently, which helps us start to quantify value. And you’ll see it has five sections and the first section is about identifying the customer segment, who is going to receive the virus. We put some little questions here to help you think through, you know, what sort of information need to put into the framework. The next is you want to think about the dimension right? And thinking more about how what benefit does the segment receive from the solution, right? The magnitude, right? Next part is the economic impact. Right? And this is where we start to quantify value. We get it away from this vague, nebulous idea, right? And we start to say, hey, what’s the number what’s in dollars and cents, or euros or whatever currency you like to use? And below that, you express that magnitude or the economic impact using what’s called a value algorithm. So use some simple algebra to try to compute what is the economic impact. And then finally, these last couple sections here implementation, so every time you ask your customers to implement your solution, there’s always some sort of change that the customer needs to adopt. So you want to think about okay if the customer is going to adopt our solution? What do they have to do to change and then you kind of give ideas, it’s gonna be easy for them. Is it medium? Is it hard? And then we we think the three broad categories about increasing revenue, decreasing costs and avoiding risk you’re trying to figure out okay, roughly what are we trying to do with this? dimension? This that’s the framework.
Jason Tanner 18:25
So when we’re in the academy, we get to see dozens of these stars as students create, to really start thinking more deeply about the benefits. So they can ultimately get to the value statements and value numbers. The the, my daughter got a phone with her she’s turning 21 So her birthday gift was a new phone after four years or three and a half years, upgraded her phone. It was interesting to watch her you know when Carlos was talking about implementation literally watched the steps she took to receive the value in your phone in probably 45 minutes, right. Restoring from the cloud, going through the configuration. It was a great example if there’s only some overhead for the customer one because as long as possible. Now the economic impact, and Carlton talked about some simple algebra. Three in creating the use cases for the book. The examples that came up with was I wrote a about a notional solution for plumbers, electricians, other small business owners who manage a lot of service calls. So the the, the algebra was all built around, how can we increase the number of calls? What’s the call worth? So number of calls times call value, ultimately getting to the the numbers that we could use for the return on investment for the small business owner. There’s value in adding one more call a day for every technician that we have in the field. If I got 12 technicians, they make one more call your average call is $100 a day. I’m suddenly making total 1200 more dollars a day potentially. That’s worth something.
Laura Caldie 20:17
Yeah, so I think there may be questions that are running around in people’s heads, you may end up with questions. After this but if you have any definitely type them into the q&a. One of them from Ramya is when in the product lifecycle is the right time to be thinking about intangible benefits. What’s your thoughts on that Jason? And Carlton?
Jason Tanner 20:41
Yes, about lifecycle because when we think about solutions, they do have a lifecycle and I would argue that it is continuous. So the solutions evolve. We’re gonna have the initial launch, and we’re gonna be thinking about all of the potential benefits. Of the initial product. And as this adopter we obviously, learn, iterate, continue to deliver and improve and enhance the product. But along the way, particularly as we’re launching and getting early feedback, we’re going to hear about unexpected benefits to customers. Either are receiving or that they want to receive with a future evolution solution. So that’s one of the great things about being a product manager is that you get to grow with the product. We continue to gather more and more of these insights. And sometimes it’s surprising. Like I didn’t know that I was making Laura more satisfied because she feels more safe. She has more sense of security. Well, that’s a great story to tell about the intangible benefits. In fact, that may be the the factor that causes the customer to make a decision in your favor as opposed to a competitor.
Laura Caldie 21:53
Yeah, I mean, I think a lot of those intangible benefits, the only way you really understand the importance of them is by actually talking directly to your customers or to the people who who will make the purchase.
Carlton Nettleton 22:04
Yeah, I agree. And I think when product managers struggle to really think about what that value is it’s often because they don’t have that firsthand connection to customers. Right and that, that to me is a common pattern.
Laura Caldie 22:19
Well, I didn’t expect that to be the takeaway exactly from today, but maybe for people who are struggling, how many steps are you removed between you struggling with that question about what are the tangible benefits? And how many steps away are you from the actual person who’s spending the money to buy the solution you’re building? And maybe the my working hypothesis right now is the harder it is the further you are away, or the less frequently you get to talk to them all right. So if there are any other questions, stick them in the q&a. I don’t think we’re gonna get time to answer them live, but we will answer them in their email that we send out with the recording and the invitation to the next. Product Management minute that’ll be coming up on July 7. If anyone’s curious about the profitable software Academy of which these two wonderful people are instructors and content creators, definitely send me an email and I can give you a little tour or talk more about that. But yeah, almost 15 minutes, maybe it was 15 minutes after I stopped talking when we started. So next one, I’ll keep that a little bit shorter. But July 7, is the next one. And we’ll pick another topic that is, I guess, coming from students in the profitable software Academy and if they’re talking about it, probably everybody’s talking about it. So Carlton, Jason, I really appreciate you both being here and I thank you for this. Thank you for everyone for being here and we’ll see you on the seventh demo later by record
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