How to execute a successful Product Strategy
Welcome to the series
This article is the first in a three-part series for product managers with limited budgets and fixed deadlines who want to see their products succeed in the market while keeping their roadmaps and cash burn under control. Here is what we will cover in three separate articles:
- Part 1: How to execute a successful Product Discovery (this article)
- Part 2: Design and Development – Leave room for mistakes and rapid iterations
- Part 3: Growth marketing – Figure out your user acquisition strategy or go out of the business
Who should read this?
With our expertise from launching startups and our experience working with product teams inside industry-leading businesses, we developed an iterative process to introduce new products to market that succeeds for larger companies and startups with limited access to funding and resources. But, hey, if you have a lot of funding and tons of cash to burn, this might not be the best approach for you!
Our approach is designed for product managers and startup founders that want to be as efficient as possible with their resources.
You will need more than Product/Market Fit to make it in the next decade
Once upon a time, getting to the product/market fit stage was the ultimate goal. If you made it that far, everything else was supposed to be easy going. We’ve been focusing on nailing the user experience with stunning design and extensive user testing. But guess what? Great UX and UI talent is not so scarce anymore. In almost every market and vertical, you’ll find teams with amazing experience and visual designers. These days, pretty much any company launching a new product will deliver a solid user experience. Today, rising above the competition and making your product stand out is harder than ever. To see your product succeed, you need to give it an extra push. You need to move beyond UX, interaction design, and agile team setups — these are great tools but don’t guarantee success. If you want to win you need to start paying more attention to the user research and really think twice about how much value your product is bringing to the market. A solid growth marketing strategy from day one is mandatory if you want to discover the most efficient product distribution channels and if you want your initial user base to engage and work for you and help you grow.
The top three challenges in Product Design
In 2007, Marc Andressen wrote a famous piece called The only thing that matters, which talked about the importance of product/market fit. Marc’s words became the mantra for thousands of product managers, startups, and incubators worldwide. His theory was that if you build the right product for the right market at the right time, you’ll see adoption. Nowadays, I ‘m not so sure. In the last five years, getting to the product/market fit stage is not enough to guarantee success. Here is what I think today’s priorities are:
1. How will your product raise above the noise?
The online industry doubled in the last ten years, internet penetration jumped from 20% to 60%, and software already ate the world. And every person who might be your target user or customer is inundated by new products, ads, cold calls, and more. Even in the best-case scenario, where your product is a perfect fit for your target audience, penetrating through existing market noise is neither easy nor cheap.
Finding the right opportunity before moving forward with the next steps is harder than you might think. How big is the user pain point? Are you generating enough value for the user so that it’s worth the time and attention investment? What is your (unfair) advantage that will allow you to beat the competition? These are just some of the questions that you need to think about or your product will not get the adoption that you hope for.
In Part 1 of this series, How to execute successful Product Discovery, we’ll focus mostly on the problem of detecting the right opportunity and coming up with the right go-to-market strategy.
2. Is your team ready to handle failures?
Steve Blank famously claimed that to win in an existing market, you need to have products that are 10x better than your competitors’. But guess what? In the last ten years, everyone figured out how to build solid products — because of this, creating a 10x better product is almost impossible. Historically, the most common winner in this field has been the product that survived the longest, was the most efficient in using available resources, and improved continuously. There is no silver bullet here; it’s a multi-year, ongoing grind, with hundreds of iterations and small improvements where you learn to choose your battles wisely based on data and user feedback. In order to win you will have to try hundreds of things and be ready to fail quickly and at low costs.
In Part 2 of this series, Design and Development – Leave room for mistakes and rapid iterations, we’ll focus on how to make sure your execution is cost-efficient, fast, and does not leave you in huge technical debt after a couple of years.
3. Can you acquire users without going broke?
User acquisition cost is a single metric that on its own can single-handedly decide your company’s fate. Customer Acquisition Costs increased 10x from 2015 to 2020. On Facebook, for example, you will pay on average $1.86, while in other verticals you might be looking at $5/click. If you have a 5% conversion rate into an engaged user, it turns out that you’re paying $40 per active user on average. This means in verticals with higher CPCs, you could be paying a few hundred dollars per user. Facebook and Google pretty much own 90% of online internet advertising at the moment, so there is no way around paying a fortune for user acquisition on those channels. Having the right growth strategy will pretty much make or break your product strategy.
In Part 3, Growth marketing – Figure out your user acquisition strategy or go out of business), ll elaborate on why User Acquisition, Engagement, and Growth should be your mantra from day one.
Sounds good? Keep on reading and move on to Part 1: Product Discovery.
Part 1: Product Discovery
Don’t proceed until you validate your most critical assumptions
How big of a market are we talking?
Do you want to spend the next 2-3 years building your product only to realize that you reached the ceiling with no more room for growth? You need to have your world domination plan ready for the next 3-5-10 years and scale your opportunity accordingly.
What is your (unfair) advantage?
Who are your competitors? What are their strengths and weaknesses? How will you beat them in the long term (think 5-10 years from now)? Explore your opportunities in-depth with extensive market/user research. Next, validate your assumptions by prototyping and testing with your target audience and measuring their excitement level.
What are the costs to build and launch?
Run tech discovery in parallel and explore different stacks to get a sense of how expensive your product will be to build and maintain. What is the minimum viable product (MVP) that you can launch and get the most real-life user data as soon as possible?
What are the user acquisition costs in 2020?
User acquisition costs are where startups fail today. It used to be that 90% of your budget went into technology, but today it’s user acquisition costs that burn the budget most. Figure out these costs, and, as an additional reward, you will most likely increase your total return on investment (ROI).
Run these processes to discover bigger opportunities
Running extensive Product Discovery phases will help you minimize your risks and have the additional benefit of allowing you to realize more significant insights. When you dig deep into your market, talk to dozens of target users, and do extensive research on your competition, you might discover more opportunities than you anticipated. When you spend extra time on discovery and do extensive research, you’ll make sure you’re not leaving any gold at the table.
Our approach: a hybrid of waterfall and agile
Yeah, waterfall is a dirty word today, and agile is the way to go, but honestly, how many product managers do you know that will or can sign a blank check and let you iterate endlessly? Usually, we’re dealing with fixed budgets, deadlines, and expectations that we need to meet. What we do for our clients is to work with them within given constraints. We get them to a point where they have their product in the market with some initial traction. This way, our clients can then go to their bosses and CFOs, show them early results, and get bigger budgets approved to allow us to shift into a fully agile model and run an iterative process based on real-life data and feedback from the market.
Our product discovery is a combination of waterfall and agile processes. We ensure we have enough room to try new ideas, fail, and reiterate. But we also limit the number of iterations so we can deliver the product within budget and on time.
Here’s what 12 weeks of Product Discovery looks like
When we think about product discovery, user testing, etc., we want to make sure we’re building the right product. A better way to approach this process is to think of it as an investment that will maximize your returns and maybe even surprise you by blowing up your estimates (in a good way).
Research – Prep work and getting domain knowledge
Before we execute an on-site workshop with any client, we typically allow ourselves two weeks to collect enough information and gain relevant domain knowledge. This way, we can confidently bring subject matter value to our client during the workshop process.
Key activities in the research phase are:
- Stakeholder interviews
We talk to all of the people who have a stake in the project: product managers, sponsors, sales representatives, and more. We want to understand everyone’s idea of what the ultimate project goal is. We then synthesize these findings in the Alignment phase to get everyone on the same page.
- User research and market analysis
We execute user interviews with a sample of the target audience; we browse through existing online user groups to validate pain points; we estimate the total addressable market size for MVP and future versions of the product.
- Competitive analysis
We systematically evaluate and analyze all of a client’s existing competitors. Doing so results in a matrix that helps us understand the strengths and weaknesses of each competitor.
Alignment/Ideation – Onsite workshop
In the third week of Product Discovery, we typically organize an in-person workshop with the client at their offices. We require all stakeholders to be present and actively participate in the process. The main questions we want to answer are:
- How we will measure success?
- What is high-level direction of the product that will give us the best possible ROI?
- What are the most critical assumptions that we to test in the Validation phase?
Here are the tools and methodologies we use during these workshops:
- User Persona and User Journey Maps: Align on our target user and the problem we are solving.
- Impact Uncertainty Matrix: What are the most critical assumptions that we need to validate by prototyping and user testing?
- Impact Mapping: Which features have the most impact on the project’s KPIs?
- Project OKRs: Defining a clear and measurable project goal in the form of an OKR. We use OKRs because most of our clients are familiar with them and we don’t need to explain their value
Sometimes we’ll blend Alignment and Ideation phases and organize brainstorming sessions with clients when we’re trying to extract the best product ideas together. Here are some of the exercises we use that our clients love:
- Crazy-8 – Idea generation and sketching exercise
- How Might We – Detecting problem hypothesis exercise
Validation – Testing with real users
User testing is the moment of truth. Everything that we’ve up to this point, some will say is a BS strategy. We don’t want to be rude, so we refer to everything preceding this phase as “sets of untested assumptions” or “unvalidated business plans.” You need to remember that everything that’s happened so far happened behind closed doors with minimal target-user involvement. In the Validation phase, we take the most critical product assumptions, turn them into interactive prototypes, and test them with real users.
The two most popular validation methods are:
- Prototyping and User Testing
Here we build an interactive prototype, conduct a series of user tests, measure the UX/usability, and gauge the excitement level or the problem-solving value of the proposed solution. This is when we learn the likelihood of the user replacing their existing solution with our solution while understanding what drives the users’ decision-making processes. We later use this information to focus our resources and time during the design and development phase for a specific feature.
- Fake front door test
Fake Door Testing is a robust methodology to test market size, price points, distribution channel costs, and target audiences. For obvious reasons, we use it on a tiny scale with lots of care not to damage a brand’s reputation.
Definition – Setting the course
We typically finalize the process with three deliverables:
- Summarize research and user-test findings in a single presentation.
- Our product/MVP recommendation.
- High-level prototype and visual direction of the product.
We’ve used Product Discovery in this form since mid-2019, and so far, we’ve run it with about a dozen clients. Some of them include:
- PIMCO: the largest bond trader and wealth management company in the world
- Penguin Random House: the largest book publisher in the world
- Wiley: the largest educational publisher in the world
- Rosetta Stone: leading language learning company in the world
- SuperMajority: largest Women of Color network in the world
- Stark Carpet: famous, exclusive, 100+ year-old Brooklyn based family business
- Marriot: largest hotel chain in the world
So far, our clients and we are super happy with our processes. Read our client testimonials on Clutch and see our average score of 4.9+ stars. Clutch also announced us as one of the Top 3 agencies in NYC in May 2020.
Part 2, Design and Development and Part 3, Growth Marketing are comping up soon. Stay tuned…