Accidental Contradictory Incentives


Here’s a sad story that happens sometimes:

  • Product: “customer research shows adjacency between use case X and Y, but they’re from different buying centers. We should investigate products for both.”
  • Engineering: “X is a good fit for our current tech stack, but we can’t make Y scale unless we start over from scratch.”
  • Product: “okay, there’s market for X, let’s build and sell that.” 
  • Partner: “you know we do Y pretty well, let’s sign some papers”
  • …everyone works for a while to make products and partnerships…
  • Marketing: “We’ve launched the Grand Frobulator v1! It does X more bettered than anything else. We’re also announcing a Retroencapsulation partner program, for customers needing to do Y. See Partner to discuss Y, and read this document on how our products work together.”
  • …everyone works for a while to make deals happen and support them…
  • Field: “We’re trying to use the Grand Frobulator for Y and have some concerns with scalability.”
  • Engineering: “WTF? Didn’t way say no to Y because we can’t scale?”
  • Field: “well you see the customer has no budget for X but they do for Y and we don’t get paid for partnerships, so…”
  • Leadership: “guess we’d better hack up a Y solution, what can you do in two weeks with two people?”
  • Partner, Customer, Product, in chorus: “WTF?”

And so now you have regret. Not responding to the market with a product does not mean that nothing happens. It means that something else happens.

How did you get here? Misaligned incentives of course, but how did that happen? Well, it’s the same sad story as always. While people are great pattern matchers, they aren’t good at recognizing patterns when their own incentives don’t align. Sure there’s a lot of folks who’d like the story to work, but every software company wants maximal revenue at minimal cost and partnerships are hard to justify. The integration might not work, even if it does work the relationship will cost upside and commission, and no matter what… the partnership will mean extra complexity in communication. It’s easier if they fail, so they often do, falling into an arms-length relationship with a bit of connector code and a document or two. Some organizations are better than others at delaying the autoimmune response, but a truly symbiotic relationship like Wintel is exceedingly rare.

So that’s what happened, what’s next? There are three possible paths to handling this situation.

  • Pressure engineering: there are two forms of software development, incrementalism and radicalism. in this case, the product team has already established that an incremental approach with existing platform won’t work. So, it’s time to get radical. What’s it going to take to solve the Y problem? Can they build something targeted fast enough to satisfy the unhappy customers that are now on the line?
  • Pressure sales: they say good sales people are coin-operated, which means they’re experts at compensation plan optimization. If you want X to sell instead of Y, pay your sales people to sell X and don’t pay them for Y. It can be more challenging to avoid compensating X sold as if it were a Y, so the answer here is often some form of punitive response. Those have costs in terms of morale, so clear communication of expectations is critical. Most importantly, if you want partnership sales to happen, then you must pay your sales people to sell the partner product.
  • Exit the market entirely: the most radical solution of all is to give up on X and Y altogether. Sell the business unit, spin off a wholly owned subsidiary, or just announce EOL and stop investment. There’s something to say for this approach: it maintains focus on other business. If that other business is still growing into a much greater potential than is currently recognized, expanding horizontally into other markets might have been a mistake that you’re better off stopping. Of course, this is completely not-an-option unless X or Y are irrelevant to the main business.

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