Below Water Level

Every solution or product is meant for one very clear, target audience or buyer or user. It has to do with how our brains work. Based on how the offering makes a customer feel, it ends up occupying a space in the mind of the customer. The experience, word-of-mouth creates referenceability. This product is for my kind of people. This product is meant for those people, not for me.

This is exactly why you can’t just build your way out of low adoption, low growth and low valuation. Customers create categories in their minds and draw equivalence among tools and say, this is a replacement for that, because it’s about the psychological hooks or psychological spaces that certain tools occupy which are hard to dislodge in human minds.

Such categorization makes evaluation, comparison and making a choice easier for the buyer. 

Such categories are why a Quickbooks customer does not consider Netsuite, or a Mercedes customer does not consider BMW. They are simply meant for different types of customers.

Customers define these categories for themselves, they self-select themselves into and out of segments. This is why “industry segments” make no sense when designing value propositions. They are designed by people who are not customers.

The applicant tracking system, Greenhouse, is meant for managing talent acquisition. Directors or VP’s of talent acquisition know it’s for the life-cycle that starts with a candidate application, not before. Greenhouse occupies that space and cannot simply build more adjacent products out of this space, unless done gradually. Space once occupied is hard to change unless done slowly. Because buyers also develop their own habits and processes in their organizations around those categories-of-the-mind, creating operational roles centered out their tools, it is not a simple matter  of putting out a new extension to Greenhouse, lets say, for managing employee onboarding, after the offer has been accepted by a candidate. Build-and-they-won’t-come, certainly not at first and certainly not if one carries out a front assault on their buying and evaluation preferences. All it will lead to is a massively discounted product that’s still not a fit for the buyer.

This is a trap that software people keep falling into. We tend to think technical malleability of code applies to humans as well…but just ask a developer to replace Subversion or cvs with git, the opposing arguments will be rooted in the same human behaviours of categorization and spaces occupied in the mind.

All this goes to suggest that the thinking behind so-called compound products is built on a very shaky foundation. Just because one can build a series of adjacencies, does not mean that customers will evaluate each adjacency any differently than buying a new, separate alternative. Most compound products tend to miss the analytical leg-work in understanding who they are building for, what behaviours support to go against their proposed offering, what are the existing alternatives, what is the buyer’s evaluation process, etc. Compound products put the building of the adjacencies in the driving seat and not the customer.