Monday, November 30, 2015

Product Management - Design for Sustainability

Design for sustainability (D4S) is fast becoming a a baseline standard for new product design in several sectors. Construction industry has taken a lead in terms of defining standards for sustainable buildings and followed it up with certification programs. LEED Certification for buildings has become mainstream in the US and similar certification program from IGBC is taking roots in India.

2015 United Nations Climate Change Conference begins in Paris on November 30th 2015.  As world leaders talk and negotiate deals on global climate issues, we as product managers can do few things on developing sustainable products.

A truly sustainable product is one that:

  • Uses the waste of other processes as its input, and minimizes or eliminates the use of virgin materials extracted from the earth
  • Creates output that can be used by other processes or returned to a natural state, and eliminates waste that can't be used or returned to a natural state
  • Uses the least amount of energy to manufacture the product and to achieve the desired outcome.

Today, Sustainability can no longer be just a buzz word. Today, Sustainability has to be the core in companies at a variety of levels starting at the highest levels.

1. Strategy. 
Some companies decide what to make or do based on sustainable business
ideals. Godrej Group has made environmental sustainability as a key part of its
business strategy. Godrej Properties - the real estate arm of Godrej has been a leader in Green buildings and is a sponsor of IGBC Green Building Certification program.

2. Supply chain. 
Retail companies such as Walmart requires its suppliers to disclose and evaluate full environmental impact of their products. Companies are now paying deep attention to industrial ecology, which analyzes all the material and energy required to create the product. This often extends beyond the domain of a single business and right to the basic sources of raw materials. For example, retailers such as Tata Chemicals is promoting Organic food products under the brand Tata Shakti, Starbucks is promoting Fair Trade Coffee etc.

3. Operations 
Decisions about how to make and move products increasingly reflect environmental impacts. Companies are now looking at all levels of operations to lower energy usage and now have created Environmental Management Systems (EMS), which have operationalized the tracking, documentation, and reporting of environmental impacts by day to day operations. The businesses can no longer hide from legal implications of negative environmental impacts. In case of several industries, there are several legal or regulatory requirement to adhere to minimum environmental practices.

4. Product development & design
Companies have incorporated sustainability into their new product development process in ways ranging from specifically creating "green" products. Sustainable products are those products that provide environmental, social and economic benefits while protecting public health and environment over their whole life cycle, from the extraction of raw materials until the final disposal.

Many faces of sustainable product design

Now that I have given a bit of background on sustainability, let's talk about sustainable product design.

Sustainable design is the term we've chosen to represent the intelligent application of the
principles of sustainability to the realm of engineering and design of products.

The term "sustainable design" is just one holistic term used to describe the use of sustainability principles in the design and development of products. This includes sustainable engineering, environmentally sustainable design, eco-design, and green design.

When products are to be designed for sustainability, there are several factors that needs to considered during the product design stage:

1. Design for Environment
2. Design for Disassembly & Recycling
3. Design for Energy Efficiency
4. Design for Health & wellness
5. Green Marketing

Design for Environment 

The Objective here is to minimize pollution and thus reduce human and environmental risks that the product entails. It means designing products that should be safe (both during operation of the product and after disposal) for human health and the environment. It could mean use of green chemistry - products that leave no or minimum residues or chemical that are biodegradable etc.

This starts with identifying industrial & institutional products that are deemed to be safer for human health and the environment through an evaluation, define best practices and identify safer chemical alternatives.  

At this stage of product design, It also involves identifying use of sustainable raw material inputs for the product and also use of recycled raw materials.

Design for Disassembly

This design aspect is essentially to address the end-of-life phase of product by designing the product that is easy to disassemble and enable the easy recovery of parts, components, and materials from products for recycling at the end of their life.
Recycling and reuse are a good way to create a sustainable world, but it requires products that can be disassembled cleanly and effectively. Design at this stage is primarily focused on end-of-life considerations as one means of encouraging more environmentally conscious design and greater resource conservation.

Design for Energy Efficiency

Environmental impact of product over the lifespan of the product has to be considered. Products must be designed to minimize the environmental impact. Product must be designed to use minimize energy usage during its lifetime. Every version of product must review the energy usage and develop new technologies to reduce energy usage.

Design for Health & Wellness

All products have to be used by people and during its life span, the product must not emit any hazardous outputs that impact health & wellness of the operators. This includes chemical vapors, heat, light, noise or electromagnetic radiation which adversely impact the health & wellness of the operators. For example, design newer cell phones that emit lesser radiation.

Products that use volatile chemicals in form of adhesives or paints must be designed to use chemicals that emit less or does not cause any harm.

Green Marketing

Green Products can have a powerful advantage. Companies find that green products and  promoting the environmental responsibility/benefits of their products has a powerful marketing angle. Touting the "green" aspects of existing products, processes, or systems has immensely  benefit product marketing.

From product design perspective, it helps product designers and product marketing to work together to know what benefits of their sustainable design and engineering efforts can be claimed publicly.

Green Product Leadership  

Developing Green Products often requires taking a leadership position for the extended product supply chain. This requires voluntary partnerships among manufacturers, retailers, government, and non-government organizations to set up effective green supply chain systems and practices. For example, in case of cell phone batteries - it will require working with raw material suppliers and also product recyclers and environmental agencies.

Taking product leadership means encouraging more environmentally conscious design and greater resource conservation. Working with various public and private sector stakeholders, to promote 'greener' design, setting up greener product standards, and establishing greener purchasing practices.

From Green Product Leadership perspective, there are many ways to create environmentally sustainable business ecosystems. Sustainable design is just one aspect. Designing products for a broader purpose by matching user needs with right products that last for the lifetime of the customer needs, will eventually change customer behavior and sustainable designs can influence user behavior for a more sustainable use cases.

While designing green products, one must think in terms of whole systems, the ecosystem context, product service and the supply chain. Only then the product will be really "green" and help create a sustainable world.

Closing Thoughts 

We are now at the start of establishing an ecological civilization. The old thinking of industrial civilization that sees the relationship between humans and nature as opponents, and uses technology to tame the wild nature - must go away.

Sustainable products and Green engineering looks at the relationship between humans and nature as a harmonious symbiotic relationship.  

Thursday, November 26, 2015

Software Product Management & Design of Services

Most enterprise software product are often bundled with a set of services. For example SAP (ERP) or Banking systems need extensive services for customers to make full use of the software. So when we look at developing new enterprise software products, product managers need design the services that is offered with the product.

To begin with software products are essentially intangible products. Customers can only get the benefits of the product. Software services is even more intangible: It cannot be touched or seen - but it only can be experienced. Services cannot be stored in inventory or traded.

It is this intangible nature of services that pose special challenges for new product design.

Design of services for enterprise software product is very complex and very challenging. Design of services must be taken into consideration at the very beginning of product design during the Product Architecture phase. For example, questions such as:

1. Which functionality must be offered out-of-the-box?
2. Which functionality must be made user configurable?
3. How customers can configure the software product?
4. How do customers deploy this software for High Availability?

Splitting the product functionality into "Core Product Capability" Vs "Customer Configurable Function" is best decided at Product architecture stage. The key factor that determines this the split between product and services is "CUSTOMER EXPERIENCE"

Defining the customer experience is the first part of product and service design. It requires identifying precisely what the customer is going to feel and think, and consequently how he or she is going to behave. In case of enterprise software products - defining customer experience is not easy. Customers are often (& always) Global. So defining customer experience on a global, multicultural context is a very big challenge.

Customer experience is directly related to customer expectations. For services to be successful the customer experience needs to meet or even exceed these expectations.

However, In case of enterprise software products, customer expectations can greatly vary depending on the type of customer and customer demographic. This includes customer age, gender, background, and knowledge.

Managing customer expectation is done with product marketing. Product marketing teams must be involved right at the stage of product design to right messaging of the product and to set right customer expectations for each market segment.

It is highly important in designing the service to identify the target market the service is geared to and create the correct expectation.

Once customer expectations are understood, the service touch points must be designed to deliver exactly what the customer is supposed to experience.

Designing all Points of Customer Contact 

Enterprise Software Services need to have a high degree of customer contact. The customer is often present while the service is being delivered. The contact between the customer and
service provider is often the service itself. So for a service to be successful this contact needs to be a positive experience for the customer, and this depends greatly on the service provider.

Unfortunately, since software services often have many people involved in multiple service touch points, there can be great variation in the type/quality of service delivered.

The quality of service varies greatly depending on the skills of the service provider. This could be the front line customer support engineer, or an on-site deployment engineer.

To ensure that every service contact has a positive experience for the customer, all employees
of the service organization need to have training that encompasses a great array of skills that
include courtesy, friendliness, and overall disposition.

The service company also needs to structure the proper incentive system to motivate employees. For example, studies have shown that employee performance is motivated more by monetary incentives rather than by their belief in the idea of the service.

To ensure high quality of service and high consistency and reliability of service, one also needs to invest in right set of tools/process/systems to aid service employees. Having the right process, procedures and SLAs for all service touch points is critical for success and must be addressed as part of service design.

Design of Service Offering

A really successful service offering do not happen spontaneously. It needs to be carefully
thought out and planned, down to every employee action. To design a successful service we must first start with a service concept or idea, which needs to be very comprehensive.

In Enterprise Software products, there are three elements of service package:

  1. The Packaged Software. 
  2. The Business Benefits.
  3. The Psychological Benefits

The packaged software is the first tangible aspect that customer experiences. A good product sets the right stage for positive customer experience. A good product is often characterized by:

  • Ease of purchase/procurement
  • Ease of install & deployment
  • Operational Stability & Reliability
  • Ease of Upgrade or Retirement 

Business benefits are what gets measured by customer. Is the software delivering the expected outputs in terms or productivity or cost savings or automation etc. These can be experienced, observed and measured.

This implies that when customer has an issue or needs a specific service, the service or the issue must be delivered efficiently and seamlessly, without any disruption to product usage. It is therefore highly important that the design of the service specifically identify every aspect of customer issues/needs.

The psychological benefits include the comfort, assurance and well-being of the customer. Customer who is buying & using the enterprise software product should feel good about it. For that reason, customers buy enterprise software from well established vendors such as HP, IBM or EMC or SAP etc., - even when there were other alternatives from smaller companies or even free open source software.  To add to customer's psychological benefits, vendors often offer services in multiple packages: Gold/Premium or Silver/Regualar class of service. The service package needs to be designed to precisely meet the expectations of the target customer group.

Once the service packages are identified, it must then be translated into detailed service design, such as SLA standards, employee training and motivated to precisely understand and satisfy customer expectations.

Unfortunately, there is no winning formal for successful service design. Service design  should support the product and provide business value to customer. Today, there are three broad options for service design:

  1. Customer Self Service
  2. Co-design Service offerings with customer or partners
  3. High Contact Services

Customer Self Service  

One way to improve customer service experience by service design is to substitute people with technology. Technology must be substituted for people wherever possible to provide service consistency and take away the dependency on tribal knowledge of service employees.  Some examples of the use of technology include the following:

1. Customer Service Request Portal and an automated ticketing system to alert when a customer request comes in.
2. Use of self-service portals where ever possible.
3. Standardized and open knowledge base or Wiki pages
4. Product user groups & forums
5. Use of Social media to interact with customers & users

Some examples of companies using extensive customer self services are: SolarWinds, Amazon Web Services, Microsoft Azure, Google Cloud, OpenStack/OpenSource software

Co-Design of Services with Customers & Partners

Another good way to improve customer experience is to co-design services with customers and partners.

In Enterprise software business there are several IT service providers such as IBM, Accenture, Dimension Data, Infosys, Wipro, TCS, etc., This ecosystem of IT service providers working with software product companies and customers can be leveraged to improve customer service and enhance overall customer experiences.

For example, a software deployment services team can be co-located with customer and address all software deployment issues. In another case, customer can choose a global IT service vendor to provide remote support & services to lower their costs and also get 24x7x365 support.

Having customer or an IT service provider involved in designing the service for enterprise software leads to higher levels of customer satisfaction and provides customers with a choice of service providers. For example, today a car manufacturer can choose services for his SAP deployment from a range of IT service partners.

Fully provided Services 

This type of service offerings, enterprise software product vendor will provide end-to-end services along with the product. Software vendor will provide a complete service offering so that no customer employee will have to work on the enterprise software, instead customer will just get all the service benefits.

The best example of this is IBM. IBM offers complete services around its enterprise products and will have IBM employees work on the software and provide only the business output to the customer. IBM employees know  customers business process and provide only the required inputs to the customer's business processes. All the internal details of service and product delivery will not be exposed to customer.

Closing Thoughts

Developing new enterprise software involves designing customer services. This involves defining what the right customer experience must be, and then designing services to deliver that desired customer experience. There are three main options for service design: 1. No touch - i.e., self-service by customer, 2. Medium Touch or co-design & co-delivery of services. 3. High Touch or Fully provided services.

Choice of service design impacts product pricing and is deeply ingrained into product strategy. When developing enterprise software, customer Services must not be taken lightly or taken up as an after thought.

To build a successful product, services must be designed at the same time as product design.

Monday, November 16, 2015

Building World Class Products

When we think of building world class products, few companies come to our mind instantly. The top one for most people is Apple, Microsoft, Google, Coca Cola, Toyota, McDonalds etc. These companies are well known for their successful products - super successful products.

When we look deeper into these successful products, we also find several common traits across these products - which helped them successful in the first place.

In this article, I will talk about one common factor: Product Development Process.

Successful companies have developed a well defined process for developing new products which at a high level can be broken down into 5 distinct stages.

1. Product Strategy
2. Product Design
3. Product Development
4. Product Marketing
5. Product Maintenance

Each of these stages by itself can offer unique competitive advantages, but the key for success is to be good in all five stages. To understand this better, let me explain each of the five stages.

Stage-1: Product Strategy

At the highest level, Product Strategy addresses the question: Why are we building this product?

This is the initial phase that starts off with the basic rationale for the very existence of the product. Starting with a well defined problem statement and being thorough and accurate about the reasons for developing the product provides a stable platform upon which one can build a successful product.

Since the product will evolve over a period of time, it is important to have a roadmap to achieve the product goals over a period of time. The roadmap defined a set of steps that will take the product from start to its intended goal - which answers the question: Why are we building this product?

Having a well defined product strategy itself provides a solid competitive advantage - as it gives a solid foundation upon which one can take quick decisions.

When defining the strategy, the starting point must be: How will this product will bring in revenue?
Having a clear revenue model at the start will help immensely all through the product life cycle. The revenue models will help in product design and product development.

The second question is to address the primary purpose of the product: What customer problem is it solving? The primary purpose will define how the product is designed, how users will interact with the product and what the user experience with the product should be?

Answer to this question will determine the distinct set of features, functions and requirements to considered during product development. This will also help in organizing all the features, functions and requirements for subsequent releases and help create a product roadmap.

Third question to ask is: Who is our competition?
Having a complete competitive analysis will help understand the market better and also learn from mistakes done by competition, so that this new product can have strengths where the competition is weak. Doing a competitive analysis will help avoiding reinventing the wheel. If the competition is doing something that works, then it is best to copy it.

There are three outputs from this stage of defining the product strategy:

Output-1. High Level Goals
This consists of the best possible business model for the product. It also defines the success criteria for the product. The business goals must be simple enough for everyone to understand and must not have any contradictory goals.

Output-2: Define the customer problem which the product will solve.
Create a statement of the problem(s) or need(s) the product will solve for customers. Having the problem/need and solution properly will provide valuable guidance for product development teams.

Output-3: Competitive Landscape. 
Doing due diligence on competitive landscape will help cut down the development time and avoid reinventing wheels. Knowing what works in the market will help big time when developing new products.

Product Strategy forms the solid foundation in which the success or failure of the product rests. One cannot afford to by-pass strategy definition stage and hope to succeed.

Stage-2. Product Design

Once the broad product strategy is defined , the next most important stage is to come up with the product design

At the highest level, Product Design addresses the question: How are we building this product?

Once the strategic foundation for the product is defined, the work on product design has to start. In this stage there are two very important questions that needs to be addressed:

1. What should be the user experience?
2. What technology platforms must be used?

One must take a wider view when considering the user experience of the product. It must include all aspects of user experience such as User interface, functions, product performance, product stability, reliability, etc. It must cover all aspects of user experience from the day of first usage to its eventual retirement. For example, Apple iPhone is designed with the user experience from the moment one walks into the Apple store, includes the packaging - the experience of opening the product package, the usage experience, and even product return.

The goal of product user experience is to be "Awesome". It must be this word that customers will use to describe your product.

Product Technology Platform is the next critical aspects that needs to be defined. In today's rapidly changing world of technology innovation, having the right technology platform makes a BIG difference.

What denotes the right technology platform depends on the product segment. For software it may be a set of underlying software development tools and development framework and the underlying OS and deployment methods etc. For computer hardware, it could mean a x86 processor or ARM or Qualcom etc.

The underlying technology framework must address questions such as:

1. Do we have the necessary skills in house to use this technology?
2. How does this technology offer intrinsic advantage?
3. Does this technology provide all the functional elements needed in the product?
4. Does this technology allow the product scale or perform at the levels expected by power users?
5. How does this technology help in the over all  design & architecture of the product & subsequent portfolio of products?
6. How does this technology help the product fit into the customer ecosystem?

The most important aspect of design stage is to ensure that people with right design skills are working on it. Often times not having the right skills hampers the design process and severely handicaps the product - which will result in product failure.  It is best to hire external consultants during the design stage and get the best of design talent.

Selection of underlying technology platform is a core engineering function that defines the product's user experience from start to finish that can eliminate problems for both the developer and users for a long period of time as defined in the product roadmap.

At this stage, Product design is not about the actual development of the product - but it is defining the tools and the framework upon which the product will be built, supported and sustained.

Note that doing competitive analysis and market analysis before embarking on product design stage can benefit immensely - as one can learn from competition and market landscape in choosing the right technology framework and also defining what the user experience should be.

Knowing what the customer expect from existing competition and their current user experience will help in a big way to create a better product.

There are few best practices that are generic enough to be applied across different products. Some recognized best practices are:

Take time to complete the design. Avoid the rush to start development as soon as possible. Instead make sure that the designs are complete. This will save time, effort and big costs later in the project.
Long time ago, when I worked on a SoC project at Silicon Valley, we spend nearly 25% of the project time in the design phase. Every aspect of design was completed, the choice of CPU cores, Memory modules, and other hardened IP was first determined, even the power envelope for the product was designed and calculated, the overall design layout of the chip was almost finalized before the actual development started. The result was a blockbuster product.

Document the Design. Spending time in documentation of the design, the requirement analysis, functional features etc. saves a lot of time during implementation. The design document serves as the product blue print.

Cut all dead wood.  Typically while designing new product, there will be demands to maintain some legacy aspects for backward compatibility. While some of the legacy requirements make business sense, some do not. Review all the legacy requirements and eliminate those which does not make business sense. This might take some bold design decisions. For example, Apple's decision to eliminate floppy drive in iMac or eliminating DVD drives in MacBook Air.

Consider the overall product ecosystem for the product. The end product must fit into the user ecosystem. Ignoring the strengths of the existing ecosystem can hamper the success of the product.
Involve  the development team. Make sure that the development team is involved in design process as early as possible. This will help them prepare and develop the product faster and better.  Product development team can provide valuable insights from start to finish and can eliminate problems.

Involve product support & customer service teams in design stage. Getting inputs from product support & service teams will help design the product for better serviceability. For example, developing software with better debug messaging will help resolve customer issues faster when the product is deployed at customer site.

Additional best practices can be learnt from experiences of other companies & competitors. There is no shame in copying and learning from other industries either. Learning from others helps lower costs  & time taken for product development.

Stage 3: Product Development

This stage answers the question: "How do we create this product?"

Once the product design is complete and design is documented, the next stage is to build the product.

During the development stage, there are three critical factors one need to consider.

a. Customer Feedback and Acceptance
b. Development Program Management
c. Product Testing & QA

a. Customer Feedback and Acceptance 

It is a good practice to involve a customer in product development stage. I have written a detailed article on co-development with customer See:

Getting customer buy in on the usability of product functions, features and user interface during the development time speeds up customer acceptance of the product and lowers the cost of sales. Developing products with constant customer interaction helps, but one also needs to know where to draw the line when it comes to meeting customer demands. For example, Google runs a long Beta program during which it collects lots of customer feedback data and tunes the product accordingly.

Ideally, the Beta program need to be designed into the product development process - so that it can be managed for optimal outcomes.

b. Development Program Management

Program management is another vital aspect of product development. No product development project will be successful without a strong program management. Program management plays a critical role in providing leadership, helps coordinates various development teams and ensures timely results.

In product development, there will be several different teams (development, release management, legal, documentation, marketing, finance, etc.,) working on the product and these teams could be globally distributed. So it is the role of program management to coordinate between the teams and provide arbitration between teams to ensure timely outputs.

Program management brings various stake holders together and facilitates decision making and in cases provide leadership to product development teams.

c. Product Testing & QA

Quality is a default expectation today. Competition will ensure that any slips up in quality is punished. So there is no room for error or slips in quality. In many cases, customers can also sue the vendor over defective products, or regulatory agencies can levy heavy fines. Thus slipping on quality is non-negotiable.

Another aspect of quality is performance. Product developers must keep the user experience top of mind and ensure performance of the product is not compromised.

All this implies that one needs to invest heavily on quality assurance process and testing.

However, the pressure for rapid product development and the need to shorten the development cycle is leading to cut backs on testing - but will always boomerang in form of product failures, higher costs of product support and need for bigger sales/marketing budgets.

In my opinion, it is better to spend a dollar on QA first - rather than spend the same dollar on customer support issues or product marketing.

Stage 4 – Sales & Marketing Strategy

As the product is getting built, one needs to answer the question: "How do we sell this?"

Today, markets area already over saturated with products. Even if there is a real customer need, getting the message to the customer is turning out to be a big challenge. Product sales strategy is essentially a plan that addresses this challenge. While sales and marketing departments have to operate in close cooperation with product development - mainly because there are several sales/marketing decisions that impacts product development:

1. Product Release schedule
2. Product Distribution Channel
3. Product Bundling
4. Product After sales support
5. Product Training
6. Product Pricing
7. Product Revenue Forecast
8. Actual Product Revenue.

There are whole books being written on sales and marketing of products and this article cannot do any justice in giving a complete sales & marketing strategy.

Sales strategy has huge impact on product pricing and product release strategy, So defining the sales & marketing strategy at the time of product development is absolutely vital.

Stage 5:  Product Maintenance & Customer Support – 'Making It Sticky'

In an ideal world, customer just buy the product and use it without any problems. They never have to contact the manufacturer and keep buying more and more of the product. But in real world, businesses must constantly elicit feedback and help customers use the product. This is the function of product maintenance and support.

Customer support strategy often serves as the feedback loop to the overall product strategy and product design. Issues found on-site has to be fixed and addressed in the next release of the product. Having a solid product support groups provide constant input to all business units involved, helps develop better product.

Keep your customers engaged with a seamless experience that makes your product stick. This will make your customer comeback for repeat purchases.  To ensure a seamless experience, one needs to:

1. Educate customers on what the product does. How your product is different than competition? How your product does things in a new & Novel way?

2. Ensure product performance on customer site is as per the product's promise. There will be differences in your test/dev environment and the real customer environment. Customer support team will have work with customer to ensure that the performance, stability & reliability of the product is as per customer expectation ( customer expectation is set by marketing)

3. Ensure product security. This is more applicable to software products or software related product delivery. With changing security threats, one needs to constantly update the product to address all product security issues in a timely manner.

4. Collect feedback from customers and channel partners on how the product is performing in the market, also collect feedback on product inventory and sales velocity.

5. Product Support groups often form the front-line when it comes to communicating with customers. Communicating with customers helps making their experience better and more rewarding, thus adding to product value.


Building a world class product is not a one time activity. It is a continuous process with several interlinked stages and constant feedback between stages

The eventual success of the product depends on strengths of each individual functions AND the strength of the interlinks between these stages. Stronger the interlink the better the product. The strategy for developing world class products is not rocket science - but the execution of all aspects of product development is!

Tuesday, November 03, 2015

Building a Leading Product

When a new product is introduced, it is extremely rare for a product to become a market leader right away. Most often, products take time to build a market share and become a market leader.

Building market leading products can be drilled down to a process. If product management executes on this process, one can build a market leading product. Building leading products is a joint function of engineering and product management.

Looking more closely at all the leading products, I have distilled this into a few product management characteristics that can serve as valuable guideposts.

1 . Know customer context and develop products accordingly 

Initial product development, say for version 1.0 is often based on certain assumptions on how customers will use the product. But when the real product is released, and customers start using the product, the actual customer usage will differ from the initial assumptions.

One has to develop a deep understanding of customer context - on how, where, when, why, what - they are using the product for, and that becomes the basis for the next round of product improvements  in the next release.

Understanding how customers use the product is the key. This insight can be gained by mainly by observation and customer interaction. I call this as Customer Anthropology.

Studying customers using the product gives a deep understanding on the context of product usage and product limitations & issues faced by customers.

2. Take a broader view of the Customer Experience

It is also important to observe (potential) customers who are not using your product and gain a deep understanding as to why they are not using your product - and instead they opt to use a competitive product.

Customer experience and use cases are very diverse and one need to look in detail on what the actual customer experiences are. Often time, it helps to think in "What-if" lines:

What if the product responds more quickly?
What if the product does this additional function?
What if the product costs more? (or less)

Taking a broader view of customer experiences will give the deep insight on how they can beat the competition and emerge as market leader.

 3. Act on insights systematically 

Once you have gained the deep insight on how customer use your product, and also why certain customers don't use your product, product leaders must act fast and systematically to address the product shortcomings.

This sounds a lot easier then actual reality. But most companies fail to act in their insights for various reasons and let the product fail.

Acting on insights takes real leadership. Ability to influence all stake holders and drive them to act consistently and systematically is the key to success!

Monday, November 02, 2015

Can NetApp Survive the EMC-DELL Whiplash?

All data storage vendors are going through a tough times. EMC decided to sell itself to Dell and go private to help survive the coming storm. Ever since EMC-DELL deal was announced, investors and customers are looking at NetApp - wondering if NetApp will survive as an independent storage vendor.

Enterprise storage industry is in a state of transition that is driven by the confluence of multiple technological advancement including Flash, software-defined storage, Big-Data, Cloud, and converged/hyper-converged systems.

Given the tough business environment, NetApp is going through tough times. Q3 2015 revenue dropped by 11%. As revenues drop, free cash flow has also dropped for last three quarters in a row. Eventually, the bottom will fall off, and profits will disappear and blood bath of red ink will spread all over NetApp's balance sheet.

NetApp Insight Conference in October 2015 indicates to that NetApp is trying to reverse the sales decline - mainly by migrating customers to 'Data Fabric' and aims to reposition NetApp as a global data management company.

Data Fabric strategy is designed to allow customers to store, access, protect, share and archive data in consistent and predictable ways across multiple internal and external data centers - including public clouds.

The days of NetApp selling storage boxes will soon come to an end, and the new CEO George Kurian has a big task on his hand to transform NetApp into a Storage Software Vendor for Hybrid clouds.

This denotes a major shift in NetApp's strategy  - which is fraught with risks.  Along the way NetApp will continue to lose revenues, it will have to rejig its sales force who will have to work hard to convince its existing enterprise customers to move to data fabric.

When revenues drop so does share prices, and with that there will be large attrition and job cuts. With declining revenues and reduced staffing, the strategy will be tough to execute.

Challenges Facing NetApp

NetApp is facing several challenges - which can be summed up in one word "Google".

Not that Google is a direct competitor, but it personifies all the challenges NetApp faces:

1. Data moved to Cloud
2. Move towards commodity hardware
3. Open Stack & Open Source Software

Data moved to Cloud

Cloud is now main stream, and customers are moving lots of data to cloud. Recent advances in cloud archive storage, cloud access gateways and hybrid on-premises/cloud data management will accelerate the movement of data to the public cloud.

As enterprises move data to cloud, they will need less of storage boxes - which has a direct impact on NetApp's revenue.

Move towards commodity hardware

Big Cloud service provides have built their data centers on commodity hardware and have also developed deep engineering expertise to design and build complex storage systems for their data centers. As a result, none of the big cloud service providers (Google, AWS, Microsoft Azure ) are buying storage boxes from NetApp.

To rub salt on NetApp's wounds, Facebook and others are supporting Open Computing Project - which publishes design specifications and design documents for the custom-built servers, racks, and other equipment used in Facebook's data centers. Other cloud service vendors are fast to copy suit and order generic hardware ODM vendors in Taiwan and Asia.

Eliminating the requirement for proprietary hardware and embracing off-the-shelf platforms is leading the next revolution of data center technologies, and this is no place for NetApp.

Industry's move towards commodity hardware and Open Compute Project is rapidly eating into NetApp's revenue, and thus taking out steam out of its engine.

Open Stack & Open Source of Software

Open Source movement that started in universities has become main stream and is now impacting hardware. Starting from FreeBSD and Linux, Open Source software has grown to offer entire cloud stack solutions - called as "Open Stack". Open Stack software allows companies such as Google, Rackspace to build cloud scale data centers on commodity hardware.

Today, several companies including IBM & HP are supporting & distributing Open Stack - which is a complete set of software solution needed to run a data center. NetApp also taken a knee jerk reaction to integrated its arrays with Open Stack.

In addition to Open Stack, several other vendors are open sourcing their storage software. EMC recently announced open sourcing of its ViPR Controller - a Software defined Storage solution. Similarly Nutanix made its Acropolis App data fabric software free and open source.

The steady flow of open source software from established vendors makes it tougher for NetApp to sell high value data fabric software stack.

Open Source Software movement adds tremendous head winds to NetApp's sales and transition to "Data Fabric" strategy.

NetApp's Missteps

Internally, NetApp faces several challenges. Many of them comes from its strategy missteps and NetApp missed several good opportunities:

1. Missing Flash in Sales
2. NetApp misses the BigData boat
3. NetApp slips on SDDC & SDS solutions
4. Share buyback instead of technology acquisitions

Missing Flash in Sales

EMC was a latecomer to Flash party.  But in a short span of time, EMC's ExtremeIO became the market leader with more than 30% market share. Comparatively, NetApp's Flash Array lost out to ExtremeIO and Violin Memory, a startup.

Even now, NetApp does not seen to have a good product roadmap or product strategy to conquer Flash Array market.

NetApp misses the BigData boat

BigData needs Big Storage. Apache HDFS is designed to run on commodity hardware using the disk drives connected to servers. However, enterprises found that there is a need for a dedicated array for low cost data storage needed for Big Data Analysis. While EMC executed brilliantly with its Data Lake strategy - positioning EMC Isilion and EMC ECS arrays, and with Pivotal HD distribution. Today, EMC Isilion alone generates more than $2 Billion in sales from BigData sales. (Also see: Data lake - Solving the challenge of Big Data Integration)

NetApp slips on SDDC & SDS solutions

NetApp missed the Storage virtualization and Software Defined Storage market and waited too long to respond. As a result EMC & VMWare are able to take a lead with VSAN, ScaleIO and ViPR,  & ECS in large enterprise market, while several startups such as Chep, Nutanix, Nexanta have also leaped ahead.

In response, NetApp released FAS 8000 Flexarray Virtulization software - which was still tied to its hardware and did not get much success. Though, there is a lot of work in progress within NetApp on SDS - but I guess that NetApp has missed the boat.

Share buyback instead of technology acquisitions

One Big Strategy which worked for NetApp in the short run was Share buyback. NetApp constantly rewarded its investors with big share buybacks. $1 Billion in 2013, $1.2 Billion in 2014 & $2.5 Billion in 2015.

These big share buyback programs helped fend off pressure from Elliot Management, it also meant that NetApp did not have the money to buy other technology based firms. As a result, NetApp has fallen behind the technology curve in all aspects of storage technologies.

Since 1996, EMC has acquired over 50 companies, while in comparison NetApp has completed only 9 acquisitions.

Road Ahead

Transformation from a hardware vendor to a software vendor will be a work in progress for a long time. During which NetApp will have to rejig its top management. Departure of the company's CMO, Julie Parrish, is just the beginning.

Moving to Data Fabric Strategy entails selling more software to its existing (& shrinking) customer base. One hope for NetApp is that customers will move back to some on-premise solutions after experiencing 'sticker shock' from AWS and other public cloud services. According to Val Bercovici, NetApp's 'cloud czar' says this process is already under way.

Another hope for NetApp is that Dell-EMC deal will distract EMC for a long time and this will allow NetApp to create a space for itself. In addition, splitting of HP & Symantec-Veritas also helps in distracting competition.

But a multi-billion dollar business strategy cannot be based on HOPE!

My Take on NetApp

NetApp is one of the 'old guard' stand alone storage vendors left in the market. With an impending revenue collapse and severe market challenges, there is no way NetApp can survive on its own in this environment.

NetApp's product positioning of 'Data Fabric' as a bridge between private infrastructure and the public cloud has merit but it has huge market challenges. NetApp was never known as a software vendor and to succeed as a software vendor, it needs to merge with a strong software player - such as Microsoft or Veritas, who can take on a smaller and focused market.

I doubt Kurian and his management team can transform NetApp to become a storage software company while protecting its revenues. NetApp must strive to protect its margins - while it jettisons its hardware business.

A good option is to spin off its hardware business, while merging its data fabric software with another enterprise software vendor. In short, Dell's EMC acquisition rings a loud bell for NetApp, and like EMC, NetApp's days as an independent company is numbered.