A Product Management Journey
“We recently acquired a company with a product that significantly overlaps our core solution. Based on the projected growth and typical customer profile, our board has asked that we identify a single platform product and sunset the other offering. However, we need to make a recommendation in 30 days, and we must keep churn at or below 10% through the entire process.”
Scenarios like this are increasingly disrupting product life cycles, introducing a new flavor of product end of life (EOL)—particularly in modern enterprise software companies. In small- and mid-market enterprise software companies, a dramatic increase in M&A activity is accelerating product EOL scenarios, with the blending of two or more companies serving as a catalyst. Product professionals in established companies like SAP, Microsoft or Adobe are being affected by shifts to subscription business models and SaaS or SaaS-only product portfolios.
All evidence suggests the beginning of a new way to manage a product portfolio that will shift our thinking about when it’s time to EOL a product as well as how long the process should take. Consider that
- Outside influences on the product life cycle are accelerating the EOL decision
- Decisions aren’t routine; they will have a dramatic effect on the current product portfolio and near-term financial results
- EOL decisions must be made with great precision in a short time period
Product EOL has become a strategic tool to shift the business model or drive higher annual recurring revenue (ARR) and lifetime customer value (LCV). Product professionals are increasingly being asked by leadership to contribute to the decision and the direction of the product portfolio, and EOLing and consolidating products plays a big part.
There is plenty of information and support on how to organize the EOL phase of the product life cycle. However, most information assumes a decision has been made, usually by senior leadership, and the product management role is focused on the execution steps. But with the way things are changing around us, our thinking about end of life could use a refresher.
Most enterprise software companies have moved or plan to move to a SaaS-only portfolio and subscription business model, resulting in more downstream risks than ever. A decision to EOL a product must be balanced against the entire portfolio. What does this mean?
Most SaaS-based products are wired together—we have found the holy grail of connection and integration. If your product is even moderately successful, it’s a significant part of the portfolio, probably integrated with ancillary offerings, and it drives cross-sell and up-sell opportunities. This connection helps improve your company’s annual customer value (ACV), in many cases without driving up your customer acquisition cost (CAC).
For many of your customers, your product has exceeded expectations, and this value premium has been realized because your solution easily plugs into their workflow and connects with other critical applications. A product EOL decision can significantly affect and disrupt your best or highest-value customers.
A decision to EOL a product based on the result of an M&A or shift in strategy can trigger an unexpected spike in churn. Understanding customer sentiment, above and beyond general loyalty scores and net promoter score (NPS) is essential to the process. Even in the best organizations, the overwhelming flow of customer feedback may obscure our vision when it comes to assessing the risk factors among our highest-value customers. Depending on the product maturity stage and aggregate value of current customers, an EOL decision that isn’t tightly coupled to market data can’t be a good decision.
Furthermore, there is an awareness of these new realities of the business model shift, but they aren’t second nature to the organization. As such, it stands to reason that events that occur infrequently, such as EOL, can put the organization at risk due to lack of oversight or lack of clearly defined roles and responsibilities.
Product portfolios are complicated, and the internal competition for development resources and marketing spend is fierce. Product managers and product owners potentially have the greatest insight into the effect that broad, sweeping product decisions, such as sunsetting, will have on other products in the portfolio as well as on high-value customers.
Again, product managers and product owners potentially have the greatest insight. But if product management isn’t plugged into the market or the use cases of high-value customers, their insights will be challenged by other influencers in the organization.
Nearly 25% of product managers are unable to wind down dud projects, according to a survey conducted by Egress Solutions, and 56% have too many products to adequately fund for growth.
A software company’s product EOL strategy is a critical element of its growth strategy. Its ability to prune nonstrategic or poor-performing solutions is the most effective way to create a tighter focus and free critical resources that can positively affect top-line growth and a company’s new product-development engine.
Going forward, consider adding EOL planning as early as the product-concept phase. Given market dynamics, there’s a chance that the successful product you launched could need an EOL plan—or at least a major pivot—while it’s still your product. Also, consider the factors that will affect the life of your product, as that provides an opportunity to think about new ways to design and build software.
For example, built-in migration capabilities that minimize the burden of moving users from Windows 8 to Windows 10 represented how Microsoft focused its emphasis on a decades-old problem when upgrading their OS platform. While it took years for the company to address the issue, it’s an example of a vendor reducing customer disruption and frustration—and it’s had a positive effect on retention, satisfaction, loyalty and churn.
EOL Product Assessment
If you’re responsible for evaluating and driving the EOL process for your product, you have a lot on your plate. The scope of the product assessment can be daunting. It also requires support from other departments beyond the product or technology side of the business. Your team will need support from customer success, professional services, sales, marketing, finance and legal, as well as development and quality assurance. Today more than ever, this is a time-critical initiative. Perhaps the product has issues, sales are lagging, profitability seems unattainable, the investment to scale the platform is overwhelming—or perhaps the product is no longer aligned with the overall business direction.
In a product launch, it’s challenging to get this group of stakeholders to divide their time and work together, but there’s a natural excitement that draws the team together. Ending a product is different, but it still requires the same level of energy and commitment from the team. Engaging the team and having the members commit to the task of preparing to sunset a product is best done by sharing the long view—this is part of product management’s strategic process.
To determine if EOL is the right answer, it is important to reach a definitive decision based on market evidence, customer data and financial analysis. Consider key pieces of information that will help you hit this goal:
- Assess the company’s key assumptions:Validate assumptions by interviewing high-value customers as well as detractors (win/loss analysis)
- Evaluate your closest competitors:Be willing to examine more than just the product; evaluate your competitors’ go-to-market strategy, channel partners, marketing programs and so on
- Dive deep on key metrics:Work with other team members to identify customer ranking based on monthly recurring revenue (MRR), CAC and LCV, then correlate this with customer loyalty scores (if you find a repeatable pattern of happy and profitable customers, you have potentially identified the issue—and it might not be the product)
- Build a new financial model:Partnering with your finance team, build a financial model with new inputs that adjust for the cost of acquisition, support and the level of R&D needed, then determine whether this strengthens the product’s contribution to the bottom line
- Examine alternatives to pricing:Look for different aspects of monetization to make the product stickier
- Conduct a thorough funnel analysis:Identify where products are getting stuck or where they’re falling out of the sales process and determine what can be done to improve the marketing qualified lead (MQL) to sales accepted lead (SAL) ratio
- Streamline where possible:Determine whether the sales model can be streamlined and whether you can reduce the number of outstanding sales days
- Connect with the sales team:Interview the top sales team members and listen to their likes and dislikes about selling the offering
Once you’ve gathered this data, meet with the team and dig in. If possible, white-board the analysis in real time. Solicit input and draw out the conclusions at each phase of this assessment. Also, encourage the team to respect the data presented, but also challenge assumptions and opinions.
The financial analysis is the straightforward element in this process, so, if you can, save that work for last. Depending on your company’s culture, this may not be easy to do. But, where possible, spend ample time getting into your customers’ point of view—they ultimately bear the burden of this decision.
After the analysis and assessment are complete, drive the team to a definitive conclusion and a specific recommendation with actions. This will be challenging, and you may not reach consensus. In the end, respect for the decision and a commitment to follow through are critical. Finally, to the best of your ability, control the communication and the spin. This means sending a message out to key stakeholders in the organization as soon as possible.
Remember that ending a product doesn’t always have to mean stopping support for it. You can explore creative options and still preserve the value customers receive from your solutions. Maintaining the customer base as well as a positive relationship is sometimes more important than just EOL.
There’s no escaping the fact that ending a product will most likely result in some customer churn or customer dissatisfaction. However, if you stay true to the reason you decided to EOL—to invest in other parts of the business to make it stronger and execute against that promise—then most customers will benefit from the decision.
The EOL Playbook
While some product professionals prefer checklists, playbooks provide a complete picture of a proven practice. Great playbooks include the activities on a checklist, in addition to purpose, roles and responsibilities, success metrics, a definition of “done,” and common mistakes to avoid. Companies like Semantic and Veritas use EOL policies and playbooks to embed a standard practice and establish compliance guidelines.
Roadmaps are another practice I encourage during the EOL phase of the product life cycle. Though sunsetting may be disappointing to the product team, this phase of the product life cycle requires the same level of strategy and planning as the launch phase. EOLing a product is complicated and requires near-flawless execution. A detailed sequencing of activities is required—along with a good deal of planning and the alignment of a range of stakeholders.
Using a standard process like a playbook and an EOL roadmap is useful, as it removes the uncertainty for those engaged in the process, especially support teams that will form the first line of communication to customers. The goal is to provide a path for customers to end their reliance on a product that helps them do their job while minimizing the impact on their business operation.
Ideally, your company has an alternative in its product portfolio and a strong migration plan (including support) to ease their pain. Even if that’s the case, you’ll need a playbook and a roadmap to keep you, the wind-down team and your customers on track.
EOL Final Episode
The EOL phase of the product life cycle is as important to the continued success of a company’s product strategy as the ideation, growth and harvest phases. For product managers, working on end-of-life initiatives provides a great opportunity. Gaining insights from seeing a product reach its natural end of life after a long run in the market is fulfilling.