“We can live with customer project-based evolution of our product and service offerings. Right now we can’t afford any R&D initiatives that are not directly geared towards satisfying our contractual customer commitments.”
I’ve heard this type of argument numerous times from CEOs and board members of medium-sized software and services companies companies. They say that they recognize R&D is important, yet feel that financial constraints leave them no choice but to bring all of their investment in the medium-to-long term to a halt.
Numerous studies have shown that new customer acquisition is several times more expensive than current customer retention. Customers expect product companies to continuously enhance and evolve their products over time, and do not expect to have to pay for every such enhancement that they may request or find valuable. With this in mind, there is a fine line to be drawn between functionality within the product roadmap – which customers expect to receive as part of their support & maintenance agreements – and functionality required by the customer which represents a new revenue opportunity for the product company.
While some companies have a good level of “lock-in” once solutions based on their products have gone live, recurring business tends to come from customers who feel they are being treated fairly. Meeting the majority of product roadmap commitments in spite of challenging times contributes significantly to the customer’s feeling of fair treatment. Moreover, being a product leader or fast-follower requires new product capabilities to be available in sufficiently reliable form (i.e. at least in beta) as soon as customers are willing to pay for them. A practice of waiting for paying customers before commencing new developments will therefore result in dissatisfaction within the current customer base, as well as a competitive lag as far as major new capabilities are concerned.
Since satisfied customers and competitive products are both key to securing new business – one should not view proactive investments in product and service offering evolution as the easy choice for cost reduction. John F. Kennedy once noted: ”in Chinese, the word ‘crisis’ is composed of two characters. One represents danger, and the other represents opportunity.”
The global crisis has presented an opportunity for innovative, forward thinking companies to get ahead of the competition by continuing to invest in their offerings while their competitors stop investing. CEOs and board members take note: now that there seem to be some early signs of a recovery – it is imperative to invest in the future before it gets too late.
