A Rarely Discussed Aspect of Enterprise vs. Consumer Product Management

Much has been written about enterprise vs.consumer software product management, and there are indeed many significant differences. However, having worked across much of the spectrum (freemium and ad-supported games, ad products themselves, enterprise SaaS, APIs) I want to ruminate on one factor I have not seen discussed often, at least not directly, and that is of increasing importance—how your company’s revenue model impacts the product you build. To put it another way, is the KPI that maximizes your company’s revenue and valuation the real value being provided to users, or is it something else?

The distinction isn’t necessarily driven by enterprise vs. consumer—there are a variety of revenue models in both categories—but the dominant ones that have emerged are an enterprise explicitly paying you for a product, and a consumer using your core product for free while you generate revenue from ads, in-app purchases, or a transaction/marketplace take rate. [1] This has profound implications for product design. [2]

For example, there are some enterprise products, such as workflow tools, where your goal may actually be to minimize the amount of time people spend with your product; you’re trying to help them accomplish a task as efficiently as possible, and you are being paid directly for this. On the contrary, if your effective success metric is the number of links clicked, ads shown (largely a function of page refreshes and time spent, or “engagement”), or products sold through your marketplace, you may not be optimizing towards what is objectively best for your users. [3] This has resulted in dubious tactics like clickbait, autoplaying the next related video, and encouraging excessive and unnecessary consumption, respectively. I’m sure you can think of many others. Additionally this can open up opportunities for abuse by 3rd parties, notable examples being fake reviews and fake news, which have been quite the hot topics lately. In one way or another a lot of the data more or less gets sold on the back end too, which can have implications (such as overreaching requests for access to things like location).

An entire science has sprung up around manipulating consumers’ mindsets with digital products, and many in modern society do not have psychological freedom. Thankfully there are now those openly discussing and pushing back against these practices, but there is a long way to go. There is certainly potential utility being provided by products like Facebook and YouTube, which have made tremendous improvements to many people’s lives and yielded huge opportunities for some, but it is outright alarming just how often we check and how much time we spend with these types of products. And no doubt there are smart, probably well-meaning people working to increase these numbers. The devolution over the past 10 years of much of the developed world into zombies staring at screens has been well-documented and much-derided, and surely some of these “best practices” are partly to blame. [4]

This is not meant to be a knock on consumer product managers operating within specific revenue models per se—this is merely one aspect, albeit a big one, and there can be some unsexy facets to building enterprise products too. It’s absolutely an extra challenge to create a product that is enjoyable while also working with other constraints imposed by the business side, and no company would be successful if the product wasn’t valuable in some sense. Many consumer products also start with no revenue model at all, only to add one or more in later, though the metrics needed to show traction in order to raise funding can lead you to the same tactics. Naturally, most people would rather not have to worry about this component and just focus on building an awesome product, but you end up getting what you measure, and it’s easy to get so focused on success at the micro level you lose sight of the bigger picture. The point is that this is something we should all try to be more cognizant of.

It will be interesting to see the impact of emerging technology trends like smart notifications, voice interfaces, and the blockchain, which have the potential to disrupt parts of these products and revenue models, and perhaps we will see positive changes. However, it is because of other major technology trends—the explosion of machine learning, which can be extremely effective at optimizing towards certain outcomes, and virtual and augmented reality, which can be much more psychologically powerful than our current smartphones—that now is a good time to think deeply about what it means to truly focus on the user and put them first.

Notes

[1] To state it again, obviously there are many notable exceptions of great (and not so great) companies and products on both sides of the fence.

[2] There are of course other revenue models but these are the most prevalent today.

[3] Clearly you are not always, or ever, able to exclusively focus on what you think objectively provides the most value for your users (whatever objective value means); there are other things that drive feature and product development like cost, deadlines, what your competitors are doing, the demands of one executive or major customer, etc. but this is true for any company with a business model, regardless of revenue model.

[4] Don’t get me wrong, the average time spent watching TV in America has been a sad number for a long time, but smartphone addiction can be particularly debilitating.