6 design business habits that kill grocery
Sometimes our reflexes caused by the instinct of self-preservation can be fatal. For example, when you cross the road in Russia, you must first look to the left, and then to the right. And in England, on the contrary: first to the right, then to the left. If you forget about the left-hand traffic - you can get under the car.
When moving from a project business (for example, a web studio or an outsourcing company) to a product business (developing and launching its own solution), the same thing happens. It is difficult to avoid the usual approach to business. Director of the Accelerator of IDF, Dmitry Kalaev, spoke about the six habits of the project business, which prevent grocery growth, and in the most difficult cases, they kill a startup.
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In the project business, a client comes to you to solve a specific task, and often this task arises only in his business. The client draws up the terms of reference, and you get paid for it. For example, you have a web-studio or an outsourcing company: you sell your expertise and man-hours. And, perhaps, you have a department that outsource the development for an American startup or company. If a startup succeeds, the department has a feeling of belonging, but in fact it still acts as a contractor for this American company and does not make business decisions.
If you compare the project business with the grocery - the same patterns of behavior do not always lead to the same consequences for different types of business.
For a project business, managing many projects at the same time is beneficial. You have a dozen customers: one of them delays payment, the other changes the contractor. This could be the reason for the cash gap, but due to the fact that you have other customers, you do not sag. It diversifies the company by industry and helps with recessions.
For the food business, defocusing is death. You "spread" resources within one company into a dozen small products - at the same time you are doing slack, trello and the like of facebook on the consumer market. Ultimately, you create an “all-in-one” product and do not solve a specific customer problem. That is, you don’t show results, increase risks and lose to competing companies, where the whole team works to create a clear and simple product with limited functionality.
Therefore, in the grocery business at the start you need to focus on one segment. And move to the next segment - only when there is an understanding that your company has become a leader in its segment and confidently conveys value, and the sales process is already built.
In the project business, you sell your expertise to a client who has money. If he sets an adequate task and is ready to pay for it, and your company can solve it, this is your client. The exception is if there is an excess of orders from the project business, and it can afford not to take orders from less interesting customers.
In the grocery business, you need to learn how to choose "your" customers - focus on a specific narrow segment, sufficient for rapid development. And one of the skills that should be strongly developed in the grocery is the ability to deny "not to your" customers .
If the product is not ready for sale to a potential customer, and significant revision or creation of a new product is required - you should not immediately throw everything and go to make a product for it. It is better to put this client request in the "piggy bank". And when you have accumulated a certain number of customers with a request for a similar product, you can begin to think about whether to make it for this niche.
The task of the founder of the grocery business is to find a mass market, where customers who are eligible for our product are much more. And do not alter the product for each new customer request.
By and large, it is enough for the project business to ship the software product to the client, and the process alignment, marketing and sales of this particular product are already on the client side.
In the grocery business, it is not enough to simply draw up the TZ and coordinate with the customer the result. First, product management competencies are needed to experiment with different versions of products, trying to spend minimal resources on this — to ultimately create the product the customer needs.
Secondly, when the product is ready, the founders have a feeling that further sales and marketing will occur by themselves. Or they are perceived as one of the smallest parts of the business: the company’s budget has either 0 or no more than 10–20% of the development price in the company's budget. The founders think: “We have made a great product, then it will spread and sell itself”.
In fact, launching to the market usually costs more than the development of the finished product - because this cost, in addition to marketing costs, implies serious competences in marketing and sales. Knowing your product best is not enough to make a better business out of it. The product is not what programmers have developed and tested, and you released, the product is what the client began to buy . From the end of development to the purchase of a product by the client, there is still a lot of work that is simply missing in the project business. Therefore, to become the best business in the segment, you also need to have the best sales and marketing competencies, and this is worth the extra money.
In the project business , there is often a story “we do everything that the client asked for” - he votes with money, and therefore has the right to order the functions and scenarios of working with the product he needs. Here the following happens: the client has sent a technical task, he pays for the implementation, the company works on it, performs it and thus increases its value for other clients, including potential ones.
In the grocery business, such a reflex also often works: if the client asks and is willing to pay, the company goes to work out the request. But in the case of the grocery business you should not forget about the roadmap, the development strategy, and what product your company makes. Working with features is built in the same way as with types of clients: you see how much the planned functions fit into the development of the product - do they complicate or simplify the work of your main customer base? For example, you already have 500 customers, and the 501st wants a red “Buy” button to appear. But this means that the red button will appear not only for him, but also for the other 500 customers who have already used the product. And not the fact that they will be happy. Therefore, we must be able to balance: remember about unit-economy and customers that you consider to be targeted. This means that the functions always go through the evaluation process: they will go to plus or minus your product for the entire target audience, as they will affect the overall business margin .
There is one more good reason to argue with the client - the accumulated expertise. In the grocery business, you often become a big expert in the business of a customer than he himself: you have hundreds and thousands of customers with the same situation. Therefore, you bring to the client not only a set of functions, but also expertise in solving problems that he has. Therefore, you also know what customer requirements do not have to be met - they do not lead to a result.
In project businesses, it is not always possible to penetrate deeply into business processes and begin to transfer expertise from one client to another, so that you can safely tell the client which functions are not necessary because they will not bring results in terms of business goals. Subjective opinion must be supported by arguments and cases.
When I ask colleagues who have left the project business how they can earn more, they always say: "We will add features." For the project business, the rule “more features = more money” works. Moreover, if a company does something on the client’s technical task as a contractor, it cannot track how the added functions affect the client’s profitability. Work with the client ends at the stage of delivery and acceptance: when the product is launched, there are no bugs, and the client is satisfied with everything.
It happens that this rule also works in the grocery business . Suppose a company made a product that makes up a working calendar of employees in retail depending on the load. Solving the problem of “making money on the client as much as possible”, most likely, the founder will decide to add more integrations, speed up the calculation process, etc. If all these features are additionally paid for - the scheme works.
But actually, the question “how the customer can pay more” is not about features, but about value : if we come to the store with 5 employees with this product, the benefit from it will be an order of magnitude less than for a store with 50 by the staff. The issue of value is not governed by the number of functions, but by how your client uses them in his work: can he earn more from them or reduce some costs due to them. The grocery business is not about features, but about the result for the client.
In addition, for the grocery business, there is the opposite dependence: “more features = less money” . In some cases, the features on the contrary worsen sales: one of the well-known companies first added to the site the opportunity to buy plane tickets, then book hotels. And after adding the last feature, the company lost revenue: the conversion fell by 2 times, and the check did not grow. Therefore, it is important to think carefully what functionality will show the result, and how functions affect money. The development process in the grocery business is not tied to customer acceptance, but on whether the amount of money in your company’s account decreases or increases with the new function.
In the project business, companies can take an advance payment for work, break up the payment in stages, or get the full amount on the basis of work - it is often advantageous for them to start shipping services for free.
In the case of the grocery business, to have the finished product immediately - not at all necessary. Even before developing a product, you can check whether the customer is ready to pay for it: so you will receive confirmation that the product means something to the customer. But it is worth remembering that promises to the client must be fulfilled.
Any shipment of a product for free does not answer the question of whether the client receives the result . Only the “money in advance” system shows how much the customer is interested in your product.
“It turned out that I have experience on both sides of the barricades: in the design business and in the grocery business. Since 2004 - I am the director of digital-agency JetStyle, where I tried several times to create internal products that could not be successfully developed - the main business was eaten by the unborn.
In the project business, the responsibility for the end result lies not with the performer, but with the customer. A contractor can be arbitrarily responsible: for example, we are not supporters of the approach to “take any money if given” and “do whatever the client asks” simply because our client profile is a “long client”. For such a client, it is important to demonstrate the effectiveness of a combination of him and our specialists - this makes our food approach great. Despite this, we really always have only a fragment of responsibility: we can deal with the implementation of UX, but we cannot be responsible for the final user value, “underwater” client processes. We just do our job well, but it’s the client who decides that the most important thing now is what to invest money and effort into. If the task is set correctly by the client - for us, as for the project business, it is safe and gives a predictably good result.
A good project manager in custom development is a person who reformulates the customer's request into terms of application goals and then implements the project. His main concern is for the client to get a predictable effect in the contour of his goal.
As soon as you start working in the product , you immediately find yourself in the “Zone of Death”. This is such a strategy in Sun Tzu when bridges are burned. It is not very important whether you have investments at the first stage, or you are making a “start on your own” - you are faced with a sudden realization that from the whole range of possibilities you and only you can choose. The task of a good product manager is to be able to maintain concentration on the main client process with all your might. To do this, he needs to know very well what clients pay for, and to clearly see what his key client process is. The temptation to “bolt” another small thing to the product at any given time - USEFUL! - very large. Investors, the board of directors, partners, customers and friends will ask for this. Making the wrong choice is scary, but if your product tree instead of a single trunk turns into a bush, you are doomed. This does not scale.
In the project and product businesses, there may also be different approaches to the calculation of efficiency. For example, digital-tusovka uses the term “marketing performance” where in the field of independent technological enterprises it is common to speak of unit-economy. These are very similar approaches, but the difference in details leads to very different strategies and actions. Performance marketing, by and large, comes down to the number of leads and the cost of attraction. The driver is the people who sell specific tools - ux, targeted advertising or something else. It is important that using this approach it is convenient to find a niche in which your instrument is effective, and to explain to the client how to order it and what to consider the effect.
Unit economy adds to the performance marketing the second part of the equation - how much and with what process we earned on the client we led. Digital is not exactly interested in exactly because this part is the responsibility of the client. But when you begin to solve this problem in the context of a unit-economy, the set of tools, the approach to checking them, and the whole strategy in general, changes dramatically.
It is very difficult to feel in practice while you are on the developer’s side. But once you get it, you will always use this approach, because it is much, much more intelligent. ”
In order not to miss other FRIA articles on the development of IT start-ups and their products, as well as announcements of events, subscribe to the FRIA Friday newsletter !
When moving from a project business (for example, a web studio or an outsourcing company) to a product business (developing and launching its own solution), the same thing happens. It is difficult to avoid the usual approach to business. Director of the Accelerator of IDF, Dmitry Kalaev, spoke about the six habits of the project business, which prevent grocery growth, and in the most difficult cases, they kill a startup.
')
In the project business, a client comes to you to solve a specific task, and often this task arises only in his business. The client draws up the terms of reference, and you get paid for it. For example, you have a web-studio or an outsourcing company: you sell your expertise and man-hours. And, perhaps, you have a department that outsource the development for an American startup or company. If a startup succeeds, the department has a feeling of belonging, but in fact it still acts as a contractor for this American company and does not make business decisions.
If you compare the project business with the grocery - the same patterns of behavior do not always lead to the same consequences for different types of business.
Habit 1: “The more projects, the better”
For a project business, managing many projects at the same time is beneficial. You have a dozen customers: one of them delays payment, the other changes the contractor. This could be the reason for the cash gap, but due to the fact that you have other customers, you do not sag. It diversifies the company by industry and helps with recessions.
For the food business, defocusing is death. You "spread" resources within one company into a dozen small products - at the same time you are doing slack, trello and the like of facebook on the consumer market. Ultimately, you create an “all-in-one” product and do not solve a specific customer problem. That is, you don’t show results, increase risks and lose to competing companies, where the whole team works to create a clear and simple product with limited functionality.
Therefore, in the grocery business at the start you need to focus on one segment. And move to the next segment - only when there is an understanding that your company has become a leader in its segment and confidently conveys value, and the sales process is already built.
Habit 2: "All customers who have money are our customers"
In the project business, you sell your expertise to a client who has money. If he sets an adequate task and is ready to pay for it, and your company can solve it, this is your client. The exception is if there is an excess of orders from the project business, and it can afford not to take orders from less interesting customers.
In the grocery business, you need to learn how to choose "your" customers - focus on a specific narrow segment, sufficient for rapid development. And one of the skills that should be strongly developed in the grocery is the ability to deny "not to your" customers .
If the product is not ready for sale to a potential customer, and significant revision or creation of a new product is required - you should not immediately throw everything and go to make a product for it. It is better to put this client request in the "piggy bank". And when you have accumulated a certain number of customers with a request for a similar product, you can begin to think about whether to make it for this niche.
The task of the founder of the grocery business is to find a mass market, where customers who are eligible for our product are much more. And do not alter the product for each new customer request.
Habit 3. "We will make a product, and this will be enough"
By and large, it is enough for the project business to ship the software product to the client, and the process alignment, marketing and sales of this particular product are already on the client side.
In the grocery business, it is not enough to simply draw up the TZ and coordinate with the customer the result. First, product management competencies are needed to experiment with different versions of products, trying to spend minimal resources on this — to ultimately create the product the customer needs.
Secondly, when the product is ready, the founders have a feeling that further sales and marketing will occur by themselves. Or they are perceived as one of the smallest parts of the business: the company’s budget has either 0 or no more than 10–20% of the development price in the company's budget. The founders think: “We have made a great product, then it will spread and sell itself”.
In fact, launching to the market usually costs more than the development of the finished product - because this cost, in addition to marketing costs, implies serious competences in marketing and sales. Knowing your product best is not enough to make a better business out of it. The product is not what programmers have developed and tested, and you released, the product is what the client began to buy . From the end of development to the purchase of a product by the client, there is still a lot of work that is simply missing in the project business. Therefore, to become the best business in the segment, you also need to have the best sales and marketing competencies, and this is worth the extra money.
Habit 4. "The client is always right"
In the project business , there is often a story “we do everything that the client asked for” - he votes with money, and therefore has the right to order the functions and scenarios of working with the product he needs. Here the following happens: the client has sent a technical task, he pays for the implementation, the company works on it, performs it and thus increases its value for other clients, including potential ones.
In the grocery business, such a reflex also often works: if the client asks and is willing to pay, the company goes to work out the request. But in the case of the grocery business you should not forget about the roadmap, the development strategy, and what product your company makes. Working with features is built in the same way as with types of clients: you see how much the planned functions fit into the development of the product - do they complicate or simplify the work of your main customer base? For example, you already have 500 customers, and the 501st wants a red “Buy” button to appear. But this means that the red button will appear not only for him, but also for the other 500 customers who have already used the product. And not the fact that they will be happy. Therefore, we must be able to balance: remember about unit-economy and customers that you consider to be targeted. This means that the functions always go through the evaluation process: they will go to plus or minus your product for the entire target audience, as they will affect the overall business margin .
There is one more good reason to argue with the client - the accumulated expertise. In the grocery business, you often become a big expert in the business of a customer than he himself: you have hundreds and thousands of customers with the same situation. Therefore, you bring to the client not only a set of functions, but also expertise in solving problems that he has. Therefore, you also know what customer requirements do not have to be met - they do not lead to a result.
In project businesses, it is not always possible to penetrate deeply into business processes and begin to transfer expertise from one client to another, so that you can safely tell the client which functions are not necessary because they will not bring results in terms of business goals. Subjective opinion must be supported by arguments and cases.
Habit 5. “More features = more money”
When I ask colleagues who have left the project business how they can earn more, they always say: "We will add features." For the project business, the rule “more features = more money” works. Moreover, if a company does something on the client’s technical task as a contractor, it cannot track how the added functions affect the client’s profitability. Work with the client ends at the stage of delivery and acceptance: when the product is launched, there are no bugs, and the client is satisfied with everything.
It happens that this rule also works in the grocery business . Suppose a company made a product that makes up a working calendar of employees in retail depending on the load. Solving the problem of “making money on the client as much as possible”, most likely, the founder will decide to add more integrations, speed up the calculation process, etc. If all these features are additionally paid for - the scheme works.
But actually, the question “how the customer can pay more” is not about features, but about value : if we come to the store with 5 employees with this product, the benefit from it will be an order of magnitude less than for a store with 50 by the staff. The issue of value is not governed by the number of functions, but by how your client uses them in his work: can he earn more from them or reduce some costs due to them. The grocery business is not about features, but about the result for the client.
In addition, for the grocery business, there is the opposite dependence: “more features = less money” . In some cases, the features on the contrary worsen sales: one of the well-known companies first added to the site the opportunity to buy plane tickets, then book hotels. And after adding the last feature, the company lost revenue: the conversion fell by 2 times, and the check did not grow. Therefore, it is important to think carefully what functionality will show the result, and how functions affect money. The development process in the grocery business is not tied to customer acceptance, but on whether the amount of money in your company’s account decreases or increases with the new function.
Habit 6. “Ship for free - then take more money”
In the project business, companies can take an advance payment for work, break up the payment in stages, or get the full amount on the basis of work - it is often advantageous for them to start shipping services for free.
In the case of the grocery business, to have the finished product immediately - not at all necessary. Even before developing a product, you can check whether the customer is ready to pay for it: so you will receive confirmation that the product means something to the customer. But it is worth remembering that promises to the client must be fulfilled.
Any shipment of a product for free does not answer the question of whether the client receives the result . Only the “money in advance” system shows how much the customer is interested in your product.
Comment by Alexei Kulakov, Ridero Product Director and JetStyle digital agency Director.
“It turned out that I have experience on both sides of the barricades: in the design business and in the grocery business. Since 2004 - I am the director of digital-agency JetStyle, where I tried several times to create internal products that could not be successfully developed - the main business was eaten by the unborn.
In the project business, the responsibility for the end result lies not with the performer, but with the customer. A contractor can be arbitrarily responsible: for example, we are not supporters of the approach to “take any money if given” and “do whatever the client asks” simply because our client profile is a “long client”. For such a client, it is important to demonstrate the effectiveness of a combination of him and our specialists - this makes our food approach great. Despite this, we really always have only a fragment of responsibility: we can deal with the implementation of UX, but we cannot be responsible for the final user value, “underwater” client processes. We just do our job well, but it’s the client who decides that the most important thing now is what to invest money and effort into. If the task is set correctly by the client - for us, as for the project business, it is safe and gives a predictably good result.
A good project manager in custom development is a person who reformulates the customer's request into terms of application goals and then implements the project. His main concern is for the client to get a predictable effect in the contour of his goal.
As soon as you start working in the product , you immediately find yourself in the “Zone of Death”. This is such a strategy in Sun Tzu when bridges are burned. It is not very important whether you have investments at the first stage, or you are making a “start on your own” - you are faced with a sudden realization that from the whole range of possibilities you and only you can choose. The task of a good product manager is to be able to maintain concentration on the main client process with all your might. To do this, he needs to know very well what clients pay for, and to clearly see what his key client process is. The temptation to “bolt” another small thing to the product at any given time - USEFUL! - very large. Investors, the board of directors, partners, customers and friends will ask for this. Making the wrong choice is scary, but if your product tree instead of a single trunk turns into a bush, you are doomed. This does not scale.
In the project and product businesses, there may also be different approaches to the calculation of efficiency. For example, digital-tusovka uses the term “marketing performance” where in the field of independent technological enterprises it is common to speak of unit-economy. These are very similar approaches, but the difference in details leads to very different strategies and actions. Performance marketing, by and large, comes down to the number of leads and the cost of attraction. The driver is the people who sell specific tools - ux, targeted advertising or something else. It is important that using this approach it is convenient to find a niche in which your instrument is effective, and to explain to the client how to order it and what to consider the effect.
Unit economy adds to the performance marketing the second part of the equation - how much and with what process we earned on the client we led. Digital is not exactly interested in exactly because this part is the responsibility of the client. But when you begin to solve this problem in the context of a unit-economy, the set of tools, the approach to checking them, and the whole strategy in general, changes dramatically.
It is very difficult to feel in practice while you are on the developer’s side. But once you get it, you will always use this approach, because it is much, much more intelligent. ”
In order not to miss other FRIA articles on the development of IT start-ups and their products, as well as announcements of events, subscribe to the FRIA Friday newsletter !
Source: https://habr.com/ru/post/344706/
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