Imagine two technology companies of about the same size operating in the same market and confronting the same context of disruptive competition, rapidly changing customer behavior and complicated buying processes. Logic says that both companies should grow or stagnate at the same rate, but they don’t. Instead, one experiences steady year-over-year growth while the other stagnates, and even sees revenue declines? What are they doing differently?
Tech companies are more likely to grow when they’re customer-focused rather than internally focused
Simply put, stagnating companies constrain growth by privileging internal feedback and rigid processes over customer input and agility, according to findings from the 2019 Gartner Product Management for Product Leaders Survey. Product leaders at growth companies, in contrast, privilege feedback and insights from customers.
“It may sound reductive,” says Clifton Gilley, Senior Director Analyst, Gartner, “but tech companies are more likely to grow when they’re customer-focused rather than internally focused. Product managers at growth firms listen to what the market says it wants, and they test product ideas and prototypes with real customers before investing the time and resources in product development.”
These product management best practices correlate with technology and services provider growth:
Growth firms use customer insights to set priorities
Around half of all firms, regardless of growth status, set investment priorities by aligning with the company’s strategic goals. But the similarities between growing and stagnating companies end there.
Growth firms use direct customer feedback and market research as the second and third most important sources of input when setting investment priorities. Product managers access customer input through voice of the customer (VoC) programs that ensure a constant flow of current information from prospects and customers. Product managers also capture product usage data to gain real-world insights into how customers use existing products, and what unmet needs may exist.
Stagnating firms, in contrast, set priorities based on financial goals and executive guidance.
Growth companies validate product ideas with customers before developing them
All product teams have constraints around the resources and talent they can access. It’s common for both growing and stagnating firms to create internal resourcing plans and project plans, and to conduct competitive analysis.
But product managers at growth firms do more. Most importantly, they test assumptions with the market: They size the market, confirm that customers are willing to pay for a solution to a targeted problem and assess whether their product idea properly solves it. Growth companies are also three times more likely than stagnating companies to develop and test prototypes.
In all, product managers in growth companies are more methodical about assessing product potential and spend their time on higher-value, marketing-facing activities.
Growth firms enable their market focus with investments in data and agile
The Gartner Data Usage Study found that 59% of product managers have access to and use customer data. Yet only 33% view customer data as a critical input to product planning. Product managers may de-emphasize data because they have limited access to useful data, or because the organizational culture doesn’t value it. Yet given the strong correlation between customer focus and firm growth, product managers should make a formal business case for investing in a holistic VoC program by quantifying the value it can return to the business.
Beyond data gathering, product managers need effective product development practices so they can deliver products on time — a differentiator, given that 45% of product releases are late by a month or more. Lateness can stem from product development processes that are bogged down by process steps that have outlived their usefulness, or by product functionality that the market doesn’t want. Product managers can eliminate these and other forms of waste with agile practices that reduce upfront investment and speed up the delivery of minimum viable products.
The market determines a product’s success. When product managers reach out repeatedly and at multiple points pre- and post-launch to understand customer needs and use what they learn to define product plans, they generate stronger performance for the product team and the business.