Challenging the status quo in product strategyPublished date: Jan 28, 2020
Sometimes it’s crystal clear that the products we deliver to customers today won’t be what they want in the long run, or even a year from now. But what if you have something to lose by changing your R&D strategy? It might be revenue, a good-sized user base, or even all the time you spent to get where you are.
This post is about navigating that tricky obstacle course to achieve long-term innovation. We’ll examine how Disney used the data available to them to make strategic bets that transformed their products and company, and how you can do the same.
Disney+: Obvious only in hindsight
“People sometimes shy away from taking big swings because they assess the odds and build a case against trying something before they even take the first step. One of the things I’ve always instinctively felt . . . is that long shots aren’t usually as long as they seem.” –Bob Iger, CEO, Disney
In November 2019, the long-awaited Disney+ streaming video service launched to much fanfare, and already has tens of millions of viewers. Green-lighting the product may have seemed like a no-brainer to consumers eager to have The Lion King, Star Wars, and Avengers at their fingertips (finally). But getting the service off the ground came from many decisions made years ago, before it was a sure thing.
Adding consequence to it all, Disney would knowingly forfeit hundreds of millions in guaranteed revenue from content licensing, turn partners like Netflix and Comcast against them, and hope its new product would make up for it all in the long run.
“Innovate or die”
Despite the risks, the idea for Disney+ was born out of CEO Bob Iger’s insistence on challenging the status quo. He outlined the philosophy in his latest book:
“When you innovate, everything needs to change, not just the way you make or deliver a product. Many of the practices and structures within the company need to adapt, too.”
He believed that any company’s future success in media would be tied to owning compelling content and distributing it directly to consumers through cutting-edge technology. When he looked at market trends and made an honest assessment of Disney’s capabilities in both areas, he came to the sobering realization that they weren’t good enough in either, and getting there would mean turning their current operations upside down.
Context matters: Using market data to guide product strategy
Inside the walls of many companies lives an echo chamber, and Disney was no different. Well-meaning people generate ideas for innovation based on their experiences, then validate those ideas by talking to their colleagues who have had similar experiences. Iger knew that modernizing a 100-year-old company, filled with many long-time employees, required looking to the outside world for inspiration.
When he did, he saw content machines Netflix and HBO spending billions on original and contemporary content. Meanwhile, a market survey revealed that Disney’s most popular intellectual property was anywhere from 10 to 75 years old (at the time). He had a cash mouse in Mickey, and many other favorites like Cinderella, Aladdin, and Donald Duck –– but nostalgia wasn’t enough to win over Millennials and the emerging Generation Z.
This realization led to the acquisitions and rapid expansions of the Pixar, Marvel and Lucasfilm brands. To the Disney board of directors, these seemed like incredible “long shots,” but Iger had done the research and felt like not buying these companies was actually a bigger risk to the future of Disney (and his job). So he chose innovation.
Betting on the future: Finding the technology trends that matter to your business
Iger believed content was king, and the shift from theaters and DVDs to on-demand viewing was clear as day. The problem was that Disney didn’t have a means for delivering content directly to consumers, so it wasn’t in full control of its destiny. Middlemen were dictating the availability and discoverability of Disney classics, while also taking a slice of the revenue pie. To take back the reins, Disney poured billions of dollars into R&D to build a technology platform for the future —one that could support Disney+ and other services they’d launch.
Disney’s evolution is a fun example because we all get to experience their products. And in the process of becoming a “tech company,” they’re accounting for the same market shifts that everyone else is, from fresh Y-Combinator graduates to Unicorns to members of the Fortune 500.
When it comes to trends that digital product-led companies need to be aware of, there are a few key ones:
- The rise of mobile: It’s not just a prediction anymore; it’s backed by data. For example, in our 2019 Product Benchmarks report, we showed that user growth for SaaS products happened at 2x the rate on mobile compared to desktop. That mobile growth trend was also seen across other industries.
- Survival of the fittest: Most markets are becoming “winner-takes-most” when it comes to consumers’ attention (and money). The top products, across all industries, grow 18x the rate of the average product.
- Software as a lifestyle: “SaaS” used to be an industry, and with every passing year, software is becoming the way of the world. You can get everything from a box of hot sauces to handpicked clothes delivered to your doorstep every month. To put data behind the reality we live each day, Zuora’s 7th-annual State of the Subscription Economy shows 300% growth in global subscription revenue in the past 3 years.
Getting innovation tips from customer data
Knowing market trends is essential, but it provides only a portion of the inputs needed for a successful innovation strategy. Each product is unique and the people who use it provide the best insight into opportunities for positive change. Fortunately, users drop clues about their future needs throughout their journey with your products. The trick is finding those clues.
Before Disney +, Disney’s key customer insights came from two places:
- Early investments in Hulu. In 2009, Disney provided financial backing to Hulu, which gave them unique access to content preferences and behavioral patterns within Hulu’s apps and services.
- The success of Disney’s ever-expanding “universes.” If seven Marvel Universe movies and three Star Wars films could gross over a billion dollars at the box office, there was a good chance millions of people would pay to rewatch these movies over and over on Disney+. The full historical Disney catalogue would sweeten the pot.
With user behavior data, there are lots of questions you can ask – and answer — to find the clues users leave about their unmet needs and preferences.
- Which features and content do users engage with most? User segmentation allows you to view trends from every angle that matters to you. For example, maybe you find that users in tech hubs like San Francisco and Tel Aviv use a new search feature at twice the rate as other users. Given those markets tend to be ahead of the curve, you might want to focus resources on search experiments.
- Have users found hidden value in parts of your product that you didn’t expect? For example, you can do flow / path analysis to see how power users navigate through your product in a typical session. Maybe you find that they often go to their account profile after logging in because they’re curious about their usage history (orders / rides / upgrades / etc.), so you build out that part of the product.
- Which experiments are driving up engagement? Before rolling features out to all users, you can test early versions with a small group, providing an avenue for calculated bets informed by data. For example, you could move the navigation menus in your SaaS product from the left to the top, then see how this affects users’ ability to accomplish what they’re hoping to.
What’s your Disney+?
All product-led companies must accept the fact that today’s solution will not be tomorrow’s.
So with that in mind, try some things that feel just a little bit uncomfortable, because if you don’t, you may slip into the dreaded product black hole – the place where good products playing it safe fade into the darkness. The market and user data for making good decisions is readily available, so remember Iger’s words of wisdom after 15 years at the helm of Disney: “Long shots aren’t usually as long as they seem.”