Product Score Card – How To Measure Product Performance For Emerging Products?

How do you determine that your new product initiative is successful? What performance criteria do you put in place to measure and track performance of your emerging products? Is it revenue, is it new customer acquisition or sales growth? There are no easy answers, particularly, when you are launching a new initiative within a large organization where most of the performance metrics are designed for mature products. 

In this blog, I would like to share a set of quantitative metrics and qualitative indicators which you may want to track to determine success of emerging products.

To set the context, let us take a quick look at the product maturity based on 3-Horizons of Growth (Reference: The Alchemy of Growth – Practical Insights For Building The Enduring Enterprise By Baghai, Coley and White). Your product portfolio could fall in one of the 3-growth horizons:

o   Horizon I: This represents your current business with a mature product line.  Key strategic drivers are likely to include extending the core business and defending the turf.

o   Horizon II: This is where some of the new ideas have taken shape and you are beginning to see rise in your customers and revenues with a potential upside to become a major line of business. At this stage, you still need to invest in it.

o   Horizon III: These are some of the initiatives where you have gone beyond ideation.  It’s likely that you are validating product-market fit and refining product hypotheses based on validated learning (Please feel free to refer to the blog Building Product Hypotheses And Implementing Lean Product Development Model at http://20-milesmarch.blogspot.com/2013/09/building-product-hypotheses-and.html).

For now, let us focus on a set of metrics that you want to establish to measure product performance for products which fall in Horizon II.

Most of the organizations have well established performance metrics for mature products, but there are still gaps when it comes to making investment decisions on products which fall in the emerging category.  As a result, emerging products often don’t achieve full potential because they are measured against a set of metrics which are not relevant; they remain under funded and lack management attention needed to be successful.

As a starting point, to measure performance of emerging products, here is a set of recommended quantitative metrics and qualitative indicators:

Business leaders may want to customize the list above to create top 5-metrics to measure the performance of emerging products.  For the initial releases of emerging products, it’s recommended that there is a greater emphasis on acquiring new customers vs just tracking revenues. Gaining an insight into how customers ‘consume’ the product to achieve the business outcomes is critical. It helps shape roadmap and Go-To-Market plans for the emerging products. Also, customer acquisition velocity and renewals provide an important measure of adoption and value seen by the target customers. The quantitative measure helps shape product roadmap and execution priorities by bringing greater focus around increasing adoption and value creation for the target customers and end users. Remember, your product(s) is still in the emerging phase and has not reached a level where you have a clear repeatable pattern to make a firm revenue and growth forecast.

In addition to measuring quantitative metrics, it’s also important that qualitative indicators are tracked to make product strategy and investment decisions.  Quantitative metrics alone are not sufficient to make such decisions.

Here is a recommended list of qualitative indicators that you want to capture and analyze to track performance of emerging products:

 

The following section discusses a set of probing questions to develop qualitative indicators as a part of metrics measurement process for emerging products:

·       Target customers.

o   Are we seeing traction only within the existing customers? What about non-customers? Can we get them to start using the product? Disrupters create new markets where none existed before. Great example of this is SlingTV, which is a part of Dish Networks, and is targeted at an entirely different customer segment than their traditional Satellite TV customers.

o   Is there a commonality across multiple segments? In other words, is there a set of outcomes that your product enables which cuts across multiple segments?

o   What’s your strategy to sustain core customer base while you develop new line of business around emerging products?

·       Consumption workflow.

o   How does your product get consumed by the user to achieve the expected outcome? On a side note, market creation always does not involve destruction. It may be a good idea to clarify that your product is at least as much about nondestructive creation as it is about disruption.

o   Understanding the consumption cycle is super critical for emerging products so you can define partner strategy and also identify opportunities to disrupt the market.

·       Understanding customers.

o   Do you really understand who the customer and end users are?

o   Are there opportunities to go to the actual user or you have to go through intermediaries?

o   Do you really understand the customer outcomes which matter to them? Do you clearly understand the purchase criteria?

o   Are customer satisfaction scores as high as the financial indicators?

o   Are there consumption gaps?  In other words, does your product have more features and complexity than most of your customers value?

·       Business model.

o   What are the business models which are out there today for similar products? Understanding these models is critical even if they are not attractive today.

o   Is there a greater shift happening in the industry which may change cost-value equation? How does that affect your product?

o   How durable and scalable your business model is? Are there changes in the market which could threaten your business model?

By combining quantitative metrics and qualitative indicators, you can not only establish a clear set of success criteria for the emerging products, you will also have analytics to shape your future direction to build a winning product!