3 Reasons Why Your Company Should Be Product-Driven to Succeed For quite some time, venture capital companies have advocated for a product-driven business strategy. However, only a small number of start-up founders grasp its true meaning and effectively implement this strategy.
By Max Faldin Edited by Micah Zimmerman
Opinions expressed by Entrepreneur contributors are their own.
Throughout my entrepreneurial journey, I had never assumed the role of a product founder. When I successfully sold my previous company, I realized our organizational structure was imbalanced. With a workforce of 85 individuals in marketing, we only had a two-person product team.
It became glaringly evident that our company lacked a product-driven focus. In business and specifically in the realm of ecommerce, the spotlight often falls on marketing and sales, overshadowing the significance of product development. This realization became more apparent whenever I encountered missing features on platforms like Amazon.
However, my latest venture operates in the digital banking sector, where I have deliberately emphasized product development. Unlike other industries, banks primarily offer nothing more than a mobile app for money management. Recognizing this, I underwent a profound shift in my approach centered around building a product-led organization.
During my two decades of building IT products, I quickly realized that being product-driven doesn't necessarily equate to being customer-centric, but it can help businesses on their way to customer-centricity. Achieving true customer-centricity requires more than just hiring product-oriented individuals, it demands intentional decentralization of decision-making — something that doesn't always sit well with a founder's ego.
I believe that companies can create a strong foundation for growth and differentiation by placing products at the heart of their strategy. This article will explore three main reasons why a product-driven approach can help your business succeed.
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1. It can help your business become more customer-centric
To build a customer-centric organization, decentralizing decision-making from the beginning is essential. Startups that grant their product managers the authority to make crucial decisions foster autonomous product departments that flourish and drive a business toward a customer-centric model. They prioritize and harness customer opinions in their work and decision-making processes, thereby empowering the growth of the organization.
Steve Jobs may be a cliché example, but there is often truth behind clichés. Despite being an extremely opinionated founder, he did not make every decision at Apple. Instead, Jobs assembled the best product design teams in the world and trusted them to determine what customers needed. He set high standards and scrutinized their decisions but did not make them himself. This fundamental distinction separates a founder-centric company from a customer-centric one; in the latter, founders ask questions rather than provide answers.
In product-led organizations, it's not the founders who provide answers. Rather, they ask the right questions, serving as catalysts for a dynamic, customer-oriented innovation process. The role of a founder is not to dictate but to build, listen, learn and empower. Embracing the insights gathered from customer interviews and feedback, the transition from a founder-centric model to a customer-centric business model relies on acknowledging the invaluable wisdom that product teams bring to the table.
By actively listening to and incorporating customer feedback, your product team can ensure your product is finely tuned to meet their expectations. Ultimately, this will lead to heightened customer satisfaction, loyalty, and the overall triumph of your company.
2. It may open up a wealth of partnership opportunities
For some companies, especially for tech companies, collaboration and integration with external providers are inherent requirements for business success.
A valuable product offer significantly enhances your prospects of establishing fruitful partnerships with other providers. A well-developed product showcases your company's capabilities and demonstrates your commitment to delivering excellence. It instills confidence in other providers, making them more inclined to engage in a mutually beneficial partnership. By offering a compelling product, you position yourself as a reliable and valuable player in the market.
One of the critical strategic decisions that founders often face, particularly in the early stages, is determining the areas of technology development to focus on internally versus those that are more suitable for outsourcing through partnerships. This decision plays a pivotal role in defining the nature of your business as a founder.
New partnerships, in their turn, can help reduce development costs. Considering the time-consuming nature of developing new technology from the ground up, collaborating with other entities allows tech companies to distribute development expenses and package or combine products and services more efficiently. This collaborative approach helps save budgetary resources and enables allocating funds toward other important priorities.
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3. It is more profitable
Being a profitable organization is a business strategy in itself. Profitability constitutes an integral component of the strategic endeavor to become a hyper-growth, customer-centric, and commercially-minded organization.
Operating as a product-driven company proves to be more profitable as you have already constructed a fine core product for your customers. Delivering the same repeatable solution to subsequent customers incurs minimal additional costs, significantly enhancing unit economics and bolstering the profitability of each sale. This efficient approach allows for improved financial outcomes, as the investment in developing the initial product yields long-term benefits regarding reduced costs and increased profitability.
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Being product-driven is a way to scale
All in all, embracing a product-driven approach can propel your startup towards rapid and efficient scaling, encompassing customer-centricity, strategic partnerships, and profitability as key elements of your business strategy.
First and foremost, prioritizing a product-driven mindset ensures a strong focus on customer-centricity. By understanding your target audience's needs, preferences, and pain points, you can develop and refine products that directly address their demands. This customer-centric approach fosters stronger relationships, enhances customer satisfaction, and encourages loyalty, ultimately driving growth and market expansion.
Moreover, adopting a product-driven approach opens the door to strategic partnerships. By developing innovative and valuable products, you position your startup as an attractive collaborator for other companies in the market. Strategic partnerships can provide access to new markets, resources, expertise, and customer bases, enabling accelerated growth and unlocking new opportunities that would be difficult to attain independently.
Profitability is a vital aspect of a product-driven business strategy. You can establish a competitive advantage and command premium pricing by focusing on delivering exceptional products that meet customer needs. This, combined with cost-efficient delivery of repeatable solutions, leads to improved unit economics and increased sales profitability. Enhanced profitability enables your startup to reinvest in further product development, expand market reach, and sustain long-term growth.
In conclusion, embracing a product-driven approach offers your startup the potential to scale rapidly and efficiently. Through customer-centricity, strategic partnerships, and a focus on profitability, your startup can gain a competitive edge, drive growth, and establish a strong foundation for long-term success.
