Why be market-driven?

Question: "I work as a software product manager for a sales-driven company and business is good for us. Why should we consider becoming a market-driven company?"

Answer: The definitive answer is that companies must follow market-led principles in order to succeed in the long-term and fully capitalize the market potential. It is no surprise that different studies covering the 1970's, 1980's and 1990's show that understanding of users' needs is the main discriminating factor between successful and unsuccessful products.

It should be clearly noted that there is nothing fundamentally wrong with being sales-driven and providing custom work. The advantage of being sales-driven is less risk because there are always unique business opportunities and individual needs to satisfy. A sales-driven product strategy can be a lifesaver and used as a survival mode tactic if market segments start deteriorating or are in a chaotic phase which precludes targeted marketing programs. The downside is that a sales-driven product strategy is inherently a short-term approach that does not build highly-sustainable product lines. Without those sustainable product lines it is very hard to build market leadership and promote company growth.

The eventual outcome of a sales-driven approach in technology companies is a plethora of product variants (produced via modification of core products) which are sold to different customers. These product variants are full of highly-individualized custom features that are developed, tested, documented, and supported. This situation invariably leads to resource duplication, wasted effort, loss of distinctive competence, and great difficulty in implementing product roadmaps.

Due to market dynamics, the majority of sales-driven companies struggle in the long run because there is nothing much to differentiate them from the competition, other than price which becomes their primary marketing tool.

When a market-driven approach is properly applied, the result is a product that will solve a pervasive market problem in an established market segment, and for which customers are willing to pay. Experience has shown that rewards do come for those who patiently follow the course. Sounds easy, but many companies do not truly focus on the customer.

Market-driven companies produce sustainable products with visibly notable targeted value. The biggest reward is that a market-driven product helps establish market leadership and revenue-growth potential.

For more information, please see the "Who's Driving Your Company?" chapter in the Product Manager's Toolkit book.