Madhavan Ramanujam: commitment

Transcript context

…Do you have any examples of products or companies where they have these conversations either way too early, way too late, or even just nailed it? Here's the thing, there's nothing way too early for this conversation. I even tell people who are early C-stage or just thinking about an idea, I would say, hey, go check, so if someone would actually pay for this idea. And there's some high level ways to actually check for this. And of course there's not about nailing the pricing strategy from get-go, three years before a product is launched, et cetera. It's about understanding whether there is a willingness to pay and then repeating this exercise as you go along so that you can refine and when you're ready to launch the product, you have a much more refined view on what is the willingness to pay. And of course then you're launching the product with a lot more enthusiasm, because you know this is actually going to have a product market pricing fit. So it's about iterating and learning and refining. So there's never too early. Too late, I think is more so the companies, this is why we wrote Monetizing Innovation. Like I told you. 72% of innovations fail and we also categorize them into why they fail. There are only four failure types and I have written about that in the book, so I can leave that for readers to actually go and see it. But all of those failure types happen because the conversation was just too late and pricing was an afterthought. Companies that did it well, maybe one or two examples that I can probably take just to motivate the concept, we talk about in the first chapter a tale of two cars and about how Porsche actually did this. And the example is something like this relevant, Porsche was really looking for launching a new innovation. They came up with an idea. They said, okay, should we launch an SUV? And even before a blueprint was drawn, they basically went and checked with the market, is there a need for an SUV? Would people value it from Porsche? Are they willing to pay for it? And to their surprise, they actually found that. And then what they did next was more fascinating. Every single feature that actually went into the car or the benefit that people had, was battle-tested with customers and no amount of convincing from product or engineering was enough. It had to be battle-tested with customers. Things like, for instance, big cup holder was inside because people loved it, needed an SUV would pay for it. Things like six feet manual transmission. People didn't need an SUVs out of the window. They literally used to bring cars in what is called as car clinics. And they would test for this and they would put people through prototypes before anything is even productized, anything is in the factory floor, where people would actually even drive around the Porsche and say, okay, did they like it? Would they pay for it? Et cetera. And then they would fine tune everything as thing that goes on. So the innovation process is very different from the classic spray and pray, build something, slap on a price, throw it out. Et cetera. And then they would fine tune everything as thing that goes on. So the innovation process is very different from the classic spray and pray, build something, slap on a price, throw it out. It was really designing the product around customer feedback, around willingness to pay. The outcome of the process could also couldn't have been more different than the traditional approach of spray and pray. And this was when they launched this SUV, it was called Cayenne, which we all know now, and it accounts for more than half of Porsche's profit and literally one of the best rolling successes in automotive history. There's just an automotive example, but if I switch gears to more of a tech example or a software example for your audience, there was this company which, think of this as a two-sided marketplace, and I'll just keep it a bit abstract, but I'll tell you the details. Two-sided marketplace, think of this as they were already monetizing on the sell side and the CEO said, okay, let's go and build a product for the buy side that people will buy. So the buy side monetization product strategy. So in classic fashion, all the product folks, product managers, et cetera, they went offsite, generated thousands of post-it notes, design thinking, yada yada, everything. And then they said, okay, we can't take all of these so many ideas to the CEO, let's prioritize it somehow. And they prioritized it to 40 ideas and they took it to the CEO and said, this is what we want to build. And the CEO asked a simple question, how do you truly know you would monetize? It's the same question the VC asked me, back in the day, and they simply didn't know. They were just guessing. So what happened next was they took wire frames, blueprints, they took product concepts and they started testing this with their customers and prospects. So stuff that they actually thought was exciting, often was way down in the list of priorities. And if they didn't do these kind of tests, they would've probably built the product around this. To give you an example, one of the features that they were building was called, or the number one feature that the internal team thought was awesome, they called it Highlight Connections from Facebook. And everyone in the company thought that people would pay for this. It's an awesome feature, they need it, they love it. And the thesis was something like this. As a buyer, if I'm buying the product from the same seller and someone in my Facebook connection has already bought that product from that seller, that's credible information in lieu of reviews and everything else, and people would find it acceptable and pay for this. When they went and tested this and pitched the idea, they got all kinds of reactions. So there was one customer group I remember which said, so yeah, you're telling me I can't pull 200 of reviews and make my own determination? That's unacceptable. That spoils the fun out of actually doing research on products. There was another group of customers who said, do you like it? Yeah, I like it. Would you pay for it? Hell no.…

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