Software Consumption

Words matter. Using the the phrase software consumption rather than building, marketing, and selling software can allow you to re-imagine your business. Here’s one such story:

I’m a fan of the logic model because it emphasizes outcome KPIs that monitor impact rather than output metrics that track activities. I also like strategy maps because they are simple visualizations that force scorekeepers to recognize multiple points of view (aka perspectives). Recently I combined the two ideas while working with a software org to design KPIs for a product launch.

In the software business, the traditional measures of success are units sold, market share, and revenue. While these work reasonably well, these success measurements are from the vendor’s perspective and have some built-in limitations. Just because software is sold or even installed doesn’t mean that it’s being used. Furthermore, just because it’s being used doesn’t mean it adds value. 

We needed to re-think software success metrics from the customer’s point of view.

Good metrics sometimes come from easy-to-understand metaphors and, in our case, we settled on the consumption of software. The analogy with eating was intentional. Humans don’t eat all the food that they purchase.  Sometimes they eat large meals and sometimes they just want a small snack. Eating with a group at a restaurant is a different experience than eating alone at home. The key is one size doesn’t fit all.

Since we expected people to consume software in different ways, we recognized we needed to market and sell it in different ways as well. Following the food theme, we used retail stores as the analogy for sales representatives. Just like there are different kind of retail stores, there are different kinds of sales reps.

For example, the warehouse rep was best for larger purchases when the customer wants to stock up on products, especially ones with longer shelf lives. The warehouse could also distinguish itself with a larger selection and a better return policy. This is a model for traditional enterprise sales.

However, we also needed specialty stores to support less common or newly-launched products which required specialized functionality and deeper domain knowledge. As an analogy, it’s unlikely that a big box retailer knows as much about a brand new music amplifier as a specific electronics manufacturer outlet does. In large sales organizations, these could be an overlay organization.

The parallel with eating doesn’t end there. Some consumers want to impulse buy snacks rather than full meals. Others would like to make purchases during off-hours or without a sales rep involves. Still others would rather not visit a store and have food delivered to them. For these kinds of consumers, it seems likely you would need to create an on-line store and maybe even allow purchases within the product itself. (Side note: why doesn’t anyone do this in enterprise software?)

How do we know if customers who purchased software were actually using what they bought? Software is like food; we know if they purchase it but we don’t know if they ate it or enjoyed it. Most orgs seem to rely on customer surveys but I worry they can be unreliable. In a perfect world, somehow the software itself would tell us how it was being used.

In the absence of a reliable way to measure software adoption, we decided a repeat purchase of the same item was a good proxy metric. People were unlikely to buy the same specialty item from the same specialty outlet over and over again unless the product was actually used and fit their needs. The limitation here is that, in software, the purchaser is not usually the same person as the end user. Thus the purchaser could be happy even if the end user was not. 

Thinking from the customer perspective forced us to segment our audience into multiple software consumption patterns. It also reinforced that the default metric of total units sold was not appropriate for our specialty store audience. We settled on a strategy of ‘try and grow’ which tracks percentage of customers who increase their use within six months. We won’t force-feed our audience all of the food up front but hope they enjoy it enough to consume more over time.

This software group just launched so it’s too early to tell whether a software consumption metric will work. Look for a follow up in a future blog.