Creating customer value is the raison d'être for a company.

Value comes from two main sources: product and customer experience.

In the customer value equation, product should deliver the vast majority of value. It’s the concrete solution that addresses the problem a customer has.

Customer experience contributes less value overall, as it isn’t what a customer directly spends money on to solve their problem. But it’s part of realizing value from a particular solution vs. other solutions. Customer experience consists of all the touch-points outside of the core product between the customer and company, such as customer support, processes the customer has to go through, relationships with people at the company and brand.

When done well, customer experience becomes a spring for both independently contributing to customer value and raising the perceived value of the core product. However, when customer experience is done poorly, it holds a company back from demonstrating value. For instance, an error-prone onboarding process can put unfounded concerns into a customer’s mind about other parts of the experience or product. While there’s no change to the product’s absolute value, its perceived value has been affected.

In the low interest rate world of 2009-2021, companies spent wild sums of capital on hiring and customer acquisition. For B2B companies that couldn’t ship products well, it meant that customer experience became the center of attention strategically. This line of thinking makes total sense: if it’s difficult to build a better product, then why not hire more people into Customer Support and Customer Success to unlock customer value from all facets of the company, not just from the product?

While the strategy may seem attractive, it has a rapidly diminishing ROI. Customer experience alone, which doesn’t directly tackle the customer’s problem, simply can’t replace the product. A product needs to deliver value, and the price someone pays for it has to make sense with the value realized. Otherwise, it’s only a matter of time until a customer loses their understanding of and ability to justify what they’re spending time and money on.

Without a valuable product, customer value as a whole is capped. Here’s the dirty secret: the customer value equation is so heavily dependent on product value that in the long-run, basically everything is futile sans a valuable product. So for a company with a middling product, stagnant survival is the outcome to pray for. Being wiped out by competition is the scenario to fear. Unfortunately, the second outcome is likely to befall companies in large markets, where ambitious competitors jump in, products get built, and the market ruthlessly clears to which product provides most value.

Although I firmly believe that investing in a good customer experience makes customers more successful, I also believe that diminishing the importance of product development is a terrible idea. This behaviour has been especially rampant since 2020, as companies aggressively pursued growth at all costs, and many loosened their focus on their products. My issue isn’t with companies who are firing on all cylinders to create customer value via both customer experience and product. The issue is with the companies who expend more into driving value in customer experience than building a better product because it’s easier to fill in gaps around the product. Again, this decision makes little sense if one truly understands the customer value equation – product value is what almost completely determines customer value. This decision also comes with great organizational risk. It whispers to the organization that the act of generating value from the product isn’t worth the difficult effort (It absolutely is). And it hints that maybe the product’s role in the company’s raison d'être is not so paramount (Again, it absolutely is). In turn, these brainworms might inform individuals’ actions, bleed into business decisions, and may even change the dynamics of which teams have more influence over impact. A spiral that ultimately could cripple the company’s ability to create valuable products.

As runways run out in the next 2-3 years, it will be fascinating to see which Emperors have no clothes – which companies have sold a vision, but haven’t been able to convert vision-to-value for their customers. The last years of frantically acquiring customers only adds to the maelstrom. Do customers actually have the problem the company is solving, or are they there for the free show? Only time will tell.

Until then, I hope companies take a step back - maybe even reset - how they create customer value, and how they’ll do that through product development. Other than cash, creating value is the best medicine for staying alive.

Creating customer value is the raison d'être for a company.

Value comes from two main sources: product and customer experience.

In the customer value equation, product should deliver the vast majority of value. It’s the concrete solution that addresses the problem a customer has.

Customer experience contributes less value overall, as it isn’t what a customer directly spends money on to solve their problem. But it’s part of realizing value from a particular solution vs. other solutions. Customer experience consists of all the touch-points outside of the core product between the customer and company, such as customer support, processes the customer has to go through, relationships with people at the company and brand.

When done well, customer experience becomes a spring for both independently contributing to customer value and raising the perceived value of the core product. However, when customer experience is done poorly, it holds a company back from demonstrating value. For instance, an error-prone onboarding process can put unfounded concerns into a customer’s mind about other parts of the experience or product. While there’s no change to the product’s absolute value, its perceived value has been affected.

In the low interest rate world of 2009-2021, companies spent wild sums of capital on hiring and customer acquisition. For B2B companies that couldn’t ship products well, it meant that customer experience became the center of attention strategically. This line of thinking makes total sense: if it’s difficult to build a better product, then why not hire more people into Customer Support and Customer Success to unlock customer value from all facets of the company, not just from the product?

While the strategy may seem attractive, it has a rapidly diminishing ROI. Customer experience alone, which doesn’t directly tackle the customer’s problem, simply can’t replace the product. A product needs to deliver value, and the price someone pays for it has to make sense with the value realized. Otherwise, it’s only a matter of time until a customer loses their understanding of and ability to justify what they’re spending time and money on.

Without a valuable product, customer value as a whole is capped. Here’s the dirty secret: the customer value equation is so heavily dependent on product value that in the long-run, basically everything is futile sans a valuable product. So for a company with a middling product, stagnant survival is the outcome to pray for. Being wiped out by competition is the scenario to fear. Unfortunately, the second outcome is likely to befall companies in large markets, where ambitious competitors jump in, products get built, and the market ruthlessly clears to which product provides most value.

Although I firmly believe that investing in a good customer experience makes customers more successful, I also believe that diminishing the importance of product development is a terrible idea. This behaviour has been especially rampant since 2020, as companies aggressively pursued growth at all costs, and many loosened their focus on their products. My issue isn’t with companies who are firing on all cylinders to create customer value via both customer experience and product. The issue is with the companies who expend more into driving value in customer experience than building a better product because it’s easier to fill in gaps around the product. Again, this decision makes little sense if one truly understands the customer value equation – product value is what almost completely determines customer value. This decision also comes with great organizational risk. It whispers to the organization that the act of generating value from the product isn’t worth the difficult effort (It absolutely is). And it hints that maybe the product’s role in the company’s raison d'être is not so paramount (Again, it absolutely is). In turn, these brainworms might inform individuals’ actions, bleed into business decisions, and may even change the dynamics of which teams have more influence over impact. A spiral that ultimately could cripple the company’s ability to create valuable products.

As runways run out in the next 2-3 years, it will be fascinating to see which Emperors have no clothes – which companies have sold a vision, but haven’t been able to convert vision-to-value for their customers. The last years of frantically acquiring customers only adds to the maelstrom. Do customers actually have the problem the company is solving, or are they there for the free show? Only time will tell.

Until then, I hope companies take a step back - maybe even reset - how they create customer value, and how they’ll do that through product development. Other than cash, creating value is the best medicine for staying alive.