Product Strategist: Deaveraging

On twitter today, alsargent tweeted, "Short, insightful presentation on the stock market from @behaviorgap "Average is not Normal" http://tr.im/fsl6 [.]" Take a look.

While the behaviorgap organization is talking about the stock market, there is some relevance to product strategy, product marketing, and development. The errors of averaging is embedded deeply in the way we manage our companies, strategies, and products.

In August of last year, I came across a book on candlestick charts. I had seen them around for years. This time I dived in. I was looking at them as a means of following the value of a product. I wrote about it here  in "Product Strategist:: Views of Values, and Value Dynamics," http://www.noozit.com/article/.ee835e3. If we took this approach to our post-sale forensics efforts, we would see where we stood every week. The prospect tells us what they think about our product, company, brand, and all the other offer considerations when they buy from us or from someone else. We sell features wrapped in benefits. They buy some promised economic outcome. Getting the numbers to candlestick our features might be difficult, but those numbers would provide ample insight.

Recently, I've come across the idea of profit pools, which provides a means of seeing your markets relative to your competitors. With a profit pool, you decook your books, so that the accounting for accountancy gets dropped and you are left with real actionable information.

It turns out that one CEO of a big public company came in, looked at his numbers and didn't see an upside. His numbers were averaged. The average hid a large collection of upsides. So he focused on those upsides, and won his hero status in the CEO community. He deaveraged.  He found money laying on the ground, it wasn't even the low hanging fruit. And, that money hadn't rotted yet under the cover of averages.

The aqua product had been the historical big seller. It had defined the company. It's category was saturated. It was late market, so it was costly to market and lacked differentiation. Once deaveraged, the numbers revealed the path to profitability through their other products, so marketing dollars were shifted.

Strategy assumes linearity. That's the same thing as saying that average is assumed. The day to day volatility gets absorbed by the average. Strategy is forecast from statistical data, and statistics boils down to taking the average and determining the error. Strategy is homeostatic.

If you ignore Moore's market discontinuities and use the commodity marketing approach that is built again on continuity and averages, you will wreck your company. Why do so many software companies die? They assumed continuity. Very few actually arrive deep into the late market where listening to the customer drives them on to the rocks. The customers they needed to listen to defected a while ago.

Product management is plagued by averages beyond the listening to the customer problem. You gather requirements from all your customers. Are those requirements segmented in a manner aligned with your market segmentation? Probably, or worse, not. Market segmentation is a statistical aggregate based on demographics that work when addressing consumers, but not businesses. Market segmentation is not domain culture-based segmentation that I've stressed in this blog. Market segmentation ignores meaning. So meaning is not being captured by the requirements process. Only an average is being captured. We were taught to ignore culture as well back in college as we worked out way through our BSCS, BSEE, or IT degrees. Surprise, they taught us wrong. Those averages turn up in our interfaces, and in turn drive implicit costs into the cost structures of our customer's businesses. Averages do not provide maximal fitness.

We, in our average organization, basically, create and average functionality for the average customer for an average price using average promotions at some average cost of sale for some average profitability. But, when did you consider yourself to be average.

Push back against averages. Push back now, particularly in the recession, or in the late market. Differentiation isn't a matter of averages. Information theory is predicated on difference. Make a difference. Stand up against average. Do it today.

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