S1 E5 | Unpacking Supply And Demand

And so what we realized is that this wasn't competing with software, this was competing with people. And so as they end up designing it out, right, the whole aspect here was to make it easy enough for the small business owner, but at the same time, just the minimum to help the accountant do the taxes. Right. Get small business owner, get paid, pay bills and understand how to make sure my taxes are okay. Very, very minimum. At the same time, the fact is that there's nobody who says they love it, absolutely nobody who says they love QuickBooks. But the reality is that at some point it's got the largest market share in the industry. From a supply side perspective, it's 13%. The next closest one is at 6. It's $8 billion in revenue.

Welcome to the Circuit Breaker podcast where we challenge the status quo of innovation.

And new product development.

We'll talk about tools, skills and methodologies used to build better products and make you a better consumer. I'm Bob Mesta and I'm the co founder of the Rewired Group and I'm one of your co hosts and we're.

Joined by Greg Engel, who is my.

Co founder and chief, Bob interpreter. Join us now as we trip the circuit and give you time to reset, reorganize and recharge your brain to build better products.

All right, Bob, today's topic. I know I spring these on you, so we don't give you much prep time and we do that for a reason. And as people get to know you, they'll know why. But today we want to talk about supply and demand. And supply and demand from Rewired's view is two different views. To look at product development, to look at your product, things like that. So we want to take a few minutes, we want to take a few minutes to kind of talk about the difference between them and then we're going to do a story later on and then we might talk about some ways to figure out if you're looking at the world through demand or supply and how they work together.

Yep. How they have to work together. Yep.

So let's start with supply. When we say a supply worldview of product development, what do we mean?

So the way I always like to describe it, as an engineer, I was taught basically to build it and they will come. So to me, the supply side is about building it, right? And it has, it's where the business sits, it's where all the industry, if you will, sits. It's everything around building the product or the service. The output is basically, in this case it's the product.

Ultimately what happens is the strange part to me is everybody would say we're customer focused, but it would always from the supply side. What would they do is they see the product and then they'd say, well who would buy the product? And then they're customer focused around the product and the customer interaction, if you will. And so the supply side is all that language that you have to have in order to understand how to make and build the product or service.

Yeah. So the way I kind of break it down into simple terms and we have a blog about this coming out in the next couple months as well. So supply is what your company does. Supply is your business model. Supply is how you make money. Supply is the resources you have in your business. That's when we talk about supply is we're talking about those things and it's the way you look at the world. So when we go into a company and we look around and we're like, oh, this is a supply side development company. What do we normally see? Or what do you see?

And then I'll say what I.

This comes from both Clay and from Deming and Taguchi, which is really around this notion of resources, processes and values. And what you realize is people when they're very, very technology focused and then trying to find application for that technology. That to me is a supply side company.

It's not bad or it's good, but the reality is that most people are trying to actually understand demand through the supply and it's inefficient at best, if you will. But most of the time when they're talking about the product, they're talking about the technology. When they talk about the roadmap of where the product can go as opposed to when we talk about the demand side, what that looks like. But they're always about that product and always about basically the technology.

Yeah. And I would say one of the tip off points or things that tip us off to that is when they talk about their product and what it does, devoid of what the customer is actually going to get done out of it. We can make this, therefore we will make it. And when we make it, everybody will want it type mentality. That's I think what we see a lot.

One of the ways that I like to think about is what I call supply side innovation and demand side innovation. Supply side innovation is about efficiency, it's about scale.

In most cases it's all about sustaining type innovations to keep the business going. When we look back in the work we've Done in different industries. The CPG industry is notorious for basically supply side thinking. Though they want to think their demand side thinking, the reality is they're just trying to get the most out of whatever the system they have. And ultimately they're trying to incrementalize everything off of the base, off of the supply side.

Let's talk a little bit about demand. When we talk about being demand on the demand side of the world. What do you mean?

Yeah, for me this is about almost disconnecting from the supply side, understanding why do I do what I do. The output of this side is basically progress. It's the notion of what causes me to say today's the day I'm going to buy something new and how am I going to pull it into my life and what is it going to help me do that I can't do today?

In most cases it's devoid of the solution and it's about that context that causes me to start to think about it and the outcomes that I seek from the solution. But ultimately demand is actually what I would say is solution agnostic. And there are multiple things across categories that can actually fit in.

Yeah, I think demand, the way we kind of think about it is what the person's going to go do with whatever product or service they buy and how does it make their life better?

They have a lot of things going on. We also know what I think makes us a little different than most people in some of the things they do is we also know people are dynamic and they're not steady state.

What do you mean by dynamic?

So they're not steady state. I don't always act the same way all the time.

Just because I'm 56 and I live in this zip code, it doesn't cause me to behave that way. It might correlate to some of my behaviors, but the reality is it doesn't.

Cause me to do that or even on even.

More frequent basis. Just because I normally drink coffee in the morning doesn't mean I'm always going to drink coffee in the morning. Because if something happened where the coffee isn't right for me that morning, I'm going to skip the coffee.

Right. And so to me this is about. So this isn't about what. Demand side is about who, when, where and why. Right. And the supply side is about what, how and how much. So to me it's though, that's the separation when I, when I, when you, when you distill it down to what I would say is Deming's terms, which Is, you know, who, what, when, where, why, how, on how much. Like, it's splitting the world into those two sides and being able to understand how do our products end up fitting into people's lives. But we need to understand their lives first and then understand kind of how to how they would pull our solution or other solutions into their life.

So that's a great segue, because I want to talk about that a little bit. Because when you hear us talk about it, a lot of people will say, well, then you're just saying, I always have to be on demand side. But we actually see supply and demand as an interdependent system.

It's how you create.

It's how progress is actually made. Even though the demand is there, if there's nothing to fill it, there's no progress to be made. And so you need both sides to actually make progress. Yeah.

And I think what we say a lot of times is there are people out there, there are economics people out there that will say supply creates demand. And what we say is, no, demand's always out there, regardless of supply reacts to it or not. And we know that from different things. And we might talk about it a little bit with the milkshake story, because the milkshake story talks about understanding that we had that people wanted that type of thing in the morning. But even when you found that demand didn't react to it or supply didn't react to, was only until other people started doing it and smoothies became really popular, that even the people you were talking with dove into that market. So demand was always there.

Right. And so this is where Clay would call that non consumption, or we would call that non consumption, where people want to make progress, but they can't. And Paul LeBlanc is another good example of where how many people wanted to go back to school but couldn't figure out how to make it work? And over the last 10 years, he's now positioned to have over 200. He's the largest university in the world. And part of this is realize that demand has been there all along. We just have never catered to that demand.

So that brings us to where do you start? Do you start with supply or do you start with demand?

I think I know your opinion on this, which is always to start with demand. My aspect is that as an engineer and a builder, I think you can start on either side, but you have to disconnect yourself from the technology as you're trying to look for places where it's going to fit, because you can always make rational arguments of why people will buy your product. And you can always get. We talked to somebody yesterday who had 20,000 people sign up and 150 people bought. And the notion is just because there's intent doesn't mean that there's actually.

Progress to be made.

What I would say is I always want to start with demand because it's actually, and you said it, it's too hard to divorce everything. You know, I can lead, anybody can lead a customer to say whatever we want them to say. And it gives us a salt, a false sense of security when we do that. So if we actually take ourselves out of the supply side and say we're going to look for pure demand and then bring the supply in after we understand that and figure out where are the trade offs we will need to make from both sides to make a mutual beneficial product. That's where we really win.

That's right.

Whenever one side gets off kilter, we always lose.

Always when it's too far demand or too far supply because there's no ideal customer experience. Right. This is where people are trying to say, well, we need to have a goal to hit. My thing is understand the five or six important things around the progress somebody's trying to make, not the 100%. You know, Jason says that a kick ass half is better than a half asshole. Right. And so part of this is to realize like at some point by starting with demand, I'll say our experience, or my experience is we can develop products and services in half the time by starting with demand. Because when we start with supply, it's like everything is possible and everything has to happen. And so part of it is to realize how that works.

Okay, So I think we kind of talked about that a lot. And what I think really brings some of this to bear is if we tell a story, which one? And in the blog that we wrote, we tell the story of Bird and Segway and how each looks at the world or how we think each looked at the world, because we didn't do work for either one of them.

No.

But I'd like you to pick a story from your bank. And it doesn't really matter what the story is to me because I think it's. We want to just talk about what, what does product development look like from a demand side and what does product development look like from a supply side and what are the differences?

Can I, you want to focus on product development or can we talk about just like as a consumer, the side, the difference between the supply side and the demand side?

Well, I think, I think it's both. But our audience is going to be a lot of, of developers or entrepreneurs or people like that. So I want to talk about the pitfalls. Yeah, so being too far, supply side or starting supply side first, but then how do we understand what pure demand saying and then flip it back to supply side to make the right product.

So to me, a really good example of that is Scott Cook and what he did at Intuit and QuickBooks. Right when @ the time they were into it was basically personal finance and it was mostly around a product called Quicken. One of the things they found as an anomaly was these people who basically used Quicken to run their business. It made no sense. It wasn't set up that way, it wasn't double entry accounting, it didn't handle all the business practices. But we kept finding more and more people using it.

One of the things is that this is where a dividing line happens in the product development side. You can say let's go to accountants and figure out the best accounting package to build for small business. So you're going to go to experts to actually figure out what that is. What happens is you end up building a product that is almost like Oracle. It's got every single detail, every single report, everything that accountant would want. But the reality is the people who are buying it are not accountants. They're actually small business owners. And when you go and interview them and talk about the progress that they want to make is to be honest, they just don't want to hire a bookkeeper. They want to be able to do it themselves. If they're going to hire somebody, they want to hire another baker, they want to hire another painter, they want to hire another person, they don't want the back office piece. So if they can actually make it easier to do so.

And so what we realized is that this wasn't competing with software, this was competing with people. And so as they end up designing it out, the whole aspect here was to make it easy enough for the small business owner, but at the same time, just enough, just the minimum to help the accountant do the taxes, get small business owner get paid, pay bills and understand how to make sure my taxes are okay. Very, very minimum. At the same time, the fact is that there's nobody who says they love it, absolutely nobody who says they love QuickBooks. But the reality is that at some point it's got the largest market share in the industry. From a supply side perspective, it's 13%. The next closest one is at 6, it's $8 billion in revenue. It's one of those things that by understanding the demand side, you don't actually end up over engineering the product to what you think is the best or the ideal, and it actually takes off and has.

Traction. So what I think I hear you saying is in that case, the core customer that was being left out of the picture in the old way was the small business person trying to do it all themselves. They were forced to use somebody to do it for them because the systems they had to put in place were too rigorous.

Definitions that we don't understand. All those types of.

Things. It would go from a shoebox of receipts to literally like, okay, now we need to do something online or in, you know, on the computer. And it's like, oh my gosh, how do I do all that? Too much, I'm going to hire.

Somebody. So what they found was if we talked to, if we segmented and we talked to people that were small businesses that didn't have accounting offices, didn't have those things, there were certain things they needed, but certain things they didn't need. So they didn't need to have all the correct language from a accounting perspective. They needed language they understood that.

The small business owner.

Understood. Yep, they needed integrations to a accountant, but I didn't need to get an accounting degree in order to use.

It. No, that's.

Right. Nobody wanted to become an accountant where if we look at some of the bigger, bigger accounting softwares at the time, it was geared towards the professional doing that job. And it had all the rules, but it had the rules based on the understanding of that, not based on the understanding of what the business was trying to.

Do. To your earlier point, that demand and that struggling moment was around for hundreds of years.

Right. People have been doing that on paper, on ledgers. And at some point the business gets large enough, there's enough people, there's something that's going on that says, okay, now I got to spend my attention somewhere else. But the reality is this whole notion of the low end of the market and being able to understand demand there is very, very different. And by understanding what are their true struggling moments and what's the true competitive set and what are the trade offs they're willing to make in order to do it is essential to then figure out how to design and develop that product. When you think about it actually puts great boundaries around it. That makes it then so much easier to make the trade offs and the things we should add and what we shouldn't Add I always think of jobs as its greatest kind of benefit is really it helps you understand what not to do.

Right. And kind of to wrap up our conversation and figure this out is I'll start and then I'll let you kind of chime in. There's some pitfalls. We talked about it being an intrepid interdependent system and that you have to work together. And we have a notion of three circles, right. Of development, which is your business strategy, the customer insights and then your capabilities. And the business strategy and the capabilities are kind of all supply side things. And then the consumer insight obviously is the demand side thing. And they have to come together in order to make something. But there's pitfalls if I'm too far on one side or the other. So one of the pitfalls we have or we see when we are on the supply side too far is we hear things like people say, well, I can convince them that they need it, or once they see it, I know they can't describe it, but once they see it, they'll want it. Those are signs that you're probably too far on the supply side because you're looking at your product before you look at.

Demand.

I think another. Sorry. It's all right. Another aspect here to me is the fact is the language. When you have to educate the consumer about the language so much that the fact is you're talking about, I always think of the camera industry is like F stop and shutter speed and focal length. All this stuff I have to learn in order to take a good picture. It just highlights the fact that somebody can come in and figure out how to make that easier for the consumer and kill you like Apple did. To me, it's that aspect of lots of jargon, lots of understanding of your capabilities and then trying to desperately find people to buy it or to use.

It. Then can you think of any pitfalls on the demand side? If I'm too far on demand side, what.

Happens? Yeah, I think there's a couple things that are too far on the demand side. One is to not see the patterns or the pathways or the jobs where you actually find it too niche or the other problem on the demand side is where people aggregate everything together and they make it everything one and they look for the themes across a lot of people as opposed to the progress that people are trying to make. You end up getting. If you make it fast, easy, fun and.

Cheap, I'll buy it. And it's like, okay, well hold on a second. It's taking it down to the actions that people are willing to take. And it's this, I always call it in chemistry, they talk about titration. It's at this right level where we actually have to be able to look at the product and look at the customer. That allows us to kind of see how the two interact.

Perfectly. Yeah, we often talk about that as being level of abstraction.

So if you're too high in your abstraction, you think it applies to everybody. And then when it's out in the marketplace, nobody knows what to make of.

It. It's a thesaurus that, to me, is where everybody's trying to say we're all saying the same words. Everybody wants to be healthy. Let's put healthy out there. This is a healthy.

Product. Right. And then health means 15 different things, and you buy it, it's great for you for healthy. But I buy it, and it's not great for me for healthy, because we have different meanings. So if we go too high that we run into that problem. If we go too low, then I have to make 150,000.

Products. Well, if there's, let's say, 18 dimensions of healthy, and I can't hit all 18 dimensions of I try to do everything for everybody, and I can't do it. Well, that's where you end up with disaster. Because at some point when you can't do, you need to actually understand what are the 20% that gets you 80% of the way there. And so part of it is that's how we end up kind of figuring out that right level of abstraction that gives us a large enough market, but also understands that it's not people and it's not companies, but.

It'S the who, when, where, and why that we're actually.

Targeting. And then I want to just close it with some questions. So some questions I generally ask people are things like, to figure this out. Are things like, are you truly looking through demand before you look through supply, or are you looking at your product first and then trying to figure out who will buy.

It? That's.

Right. That's a question to ask yourself. And if your answer is, I'm looking at my product and saying, then who will buy it, you're probably a little bit too far on the supply.

Side. Yep. If you're looking for who went and where, that is you're kind of like. Or you have a target market, but it's so abstract that.

And you're so focused on the product. That's.

Correct. And then the other question I often ask is, what is the progress Both functionally, socially and emotionally the customer is going to get when they use this product. That will also help us understand the understanding of the demand.

Side. Yep. I think the other question I always ask is, like, what are the dominoes that have to fall in people's lives to say today's the day they're going to buy your.

Product? And I'll often hear you say things like, what are they going to.

Fire?

Right. And if you can understand what they're going to fire, you have a pretty good idea of where your product's.

Fitting. It gets to one of our underlying philosophies, though, or principles, if you will, that this aspect is that there are really no new jobs. And the fact is that we can end up at some point. The competition we're talking about is nobody has any more time in the world. Everybody has 24 hours. And so at some point, time is one of the three resources that you can use. And ultimately, what are they going to not do because they're going to do.

This? I think we'll stop it there and thank everybody for listening again and look for our next couple podcasts and hopefully in the next couple we'll jump more into jobs we've done as a specific tool so we can get into some of those.

Principles. Yep. And some of the other tools. Yep. Perfect.

Thanks.

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