Managing Product Development Using Lean Framework - Building Organizational Culture

Building Organizational Culture

This is one of the most important elements of the product development process as one adopts lean product development model.  Many executives dictate using lean start-up approach to building new products without attention to the organizational nuances. Based on my experience there are 3-core areas one needs to focus on:

Management Expectation

Product leaders know that managing expectations of the key constituents within the company, such as, sales and marketing, is as important as external entities like customers and analysts. Rush to launch the product and desire to ‘get numbers now’ often leads to expensive mistakes. Adherence to clearly defined metrics holds the key to managing all around expectations. Product leaders are required to remain very objective in processing metrics since confirmed biases of some of the key executives could lead to incorrect interpretation of the feedback. Defining what would constitute a Minimum Viable Product – MVP is the key for a meaningful analysis of the metrics. And, this requires good amount of work with the customers to clearly articulate the value the product would deliver in terms of enabling business outcomes.

In addition, product teams need to gain an agreement on the release process, for example, release early and release often for a validated learning to persevere or pivot. One needs to understand implications for the sales team and existing customers. This requires a good deal of communication, both internally and externally, for all the key constituents.

Defining And Measuring Product Metrics

Clearly defined metrics provide a solid foundation to ensure team alignment in regards to product decisions. Definition of the metrics is dependent upon product maturity. One size does not fit all. Also, it’s equally important that product leaders do not get drowned in the ocean of metrics. A simple set of metrics should be defined which can serve as Dr Apgar Score (http://en.wikipedia.org/wiki/Apgar_score) to enable rapid product decisions. Here is a set of metrics for consideration based on product maturity:

1.       Number of new subscribers added.

2.       Velocity of use by the existing customers.

3.       Cohort analysis to assess product adoption following the release of key features/ enhancements.

4.       Changes in win/ loss metrics against competition.

5.       Changes in the Net Promoter Score.

Increasing Product Awareness

Often times, most of the people within the organization do not understand how the product is used by the end-customer. Lack of knowledge of the use case and customer outcomes combined with a poor understanding of what is available today and what is likely to be made available in the future further complicates the overall process of managing expectations, particularly, with sales and marketing teams which are not tracking product development on a day-to-day basis. Product teams need to educate cross functional teams on the use case and business outcomes on a regular basis.  I have seen significant improvements when you train sales and SE teams every week on the new release (assuming you are releasing a new set of features every week).

In addition, establishing a clear Plan-of-Record (PoR) is crucial to increasing product awareness.  PoR can be updated based on validated learning from the market and customer feedback. This helps product development teams (eg. Product management, Product marketing/ SE, Development and QA) to be on the same page. It also allows them to communicate product plans effectively and efficiently to all the stakeholders.

Building Product Hypotheses And Implementing Lean Product Development Model

Building Product Hypotheses

Product leaders face the challenge to balance strategic and short-term product goals. Often times, this includes supporting a legacy product line to sustain current revenue stream, while allocating resources to build products to enable growth and to develop new revenue streams. In the absence of a well-defined framework to manage a portfolio with products in different stages of product life cycle, it is difficult for the organizations to focus on right set of product priorities. What is needed is a blended approach that combines top-down, hypotheses-driven assessment and bottom-up data-driven objective analysis to refine product strategies.

One of the approaches that I have used quite extensively is outlined by Baghai, Coley & White in “The Alchemy Of Growth – Practical Insights For Building The Enduring Enterprise”. Accordingly, it helps to classify products into in 3-broad categories based on maturity levels – Mature, Emergent and Embryonic.  Product strategies will be heavily influenced by its maturity level. For example, mature products would reply more on strategies to retain and grow market share against competition. Whereas emergent products would require a greater focus on testing product-market and message-market fit. In other words, more emphasis would be to seek customer ‘value’ and ‘adoption’ metrics so one can make informed decisions to refine product strategy. By the same token, embryonic product ideas would require significant work around validating customer outcomes to refine the hypotheses in order to shape the concept. It’s worthwhile to mention that regardless of the product maturity level one needs to continuously capture key metrics around value and adoption to validate and refine hypotheses. Also, it’s super critical to recognize that organization structure and performance goals for the product development teams must be tailored based on the maturity level of the products.

Here is my checklist to build product hypotheses, develop a set of strategies and validate them using lean product development approach:

• Conduct 3-Horizon Product Portfolio Analysis to understand the overall portfolio and decide on organizational priorities.

• Make nurture, create and destroy decisions based on the analysis to rationalize product portfolio in order to make investment decisions.

• State customer outcomes that the product in each horizon will deliver. This will include a list of hypotheses to driving costs down while simultaneously increasing value for the buyers.

• Define key metrics to measure as you test various hypotheses using the Lean Startup Framework¹.  

Equipped with this checklist and associated artifacts the product leaders can successfully leverage the lean product development process. Launching into a lean product development process without this groundwork would lead to a collection of metrics and data with little to no correlation to the overall product strategy.

This approach combines top-down, hypotheses-driven assessment and bottom-up data-driven objective analysis to shape product life cycle management strategies.

Let us discuss steps to develop product strategies and hypotheses to validate and productize the offering using the lean product development approach. Developing a Strategy Canvas² is one of the very effective ways to create differentiation and lower cost simultaneously while developing a greater understanding of the customer experience and the outcomes that the customers value. Figure-1 shows a representative strategy canvas based on key outcomes that products from 3-different companies deliver. By focusing on key value drivers for Company-1 the product leaders can now build hypotheses to test using the Lean Startup Framework.  Figure-1 shows potential areas that Company-1 can invest in to improve user experience and deliver on key outcomes in relation to enabling secure online financial transactions. These hypotheses will help Company-1 improve its customer experience and create blue ocean opportunities. The product team can gain competitive advantage by differentiating their product, lowering cost and by reducing complexity for the end users with a goal to increase adoption.

The strategy canvas provides a nice framework to develop hypotheses which can be validated to enable data-driven ‘persevere’ or ‘pivot’ decision using the Lean Startup Framework¹.

 

                                                                      Figure: 1

My strong recommendation is to develop key value drivers, listed on X-axis, by focusing on end-user experience and outcomes. With consumerization of IT, product managers need to gain a better insight into how end-users would use the product. This is also where product leaders need to gain a better understanding of the customer experience and the product journey the end user is likely to undertake in order to achieve the outcomes. The strategy canvas, developed using this approach, provides an excellent opportunity to determine product shortcomings, reasons for customer complains, what features customers just don’t use or abandon halfway through. It also helps identify what the product must do to deliver enhanced value to the customers.

Defining Customer Outcomes

Here is a simple checklist, inspired by What Customer Want³ that I have used extensively to help define outcomes customers are likely to value:

1.       Are we enabling existing end users to do new jobs?

2.       Are we enabling new customers to do a job that no product allows today?

3.       Are we enabling existing customers to do an existing job better?

4.       Are we enabling a new segment of customers to do a job that others are already doing?

A systematic approach to understanding the outcomes that the product would enable provides a solid basis to create hypotheses that we may want to test in the market by using the Lean Startup Framework. This process helps understand product roadmap and strategies to not only improve the user experience and deliver on the outcomes, but also to create a competitive differentiator in the market.

Implementing Lean Product Development Approach

Basically, I have used lean product development approach by focusing on a simple checklist comprising 3-key steps:

• Test product hypotheses – This is focused on generating metrics around ‘value’ and ‘adoption’ around key hypotheses.  The process allows one to make the following key decisions:

o   Does product create value for the customers and whether it has growth potential?

o   Do we need to refine our hypotheses? In other words, is it time to pivot?

o   What investments do we need to make?

• Define MVP – This is essential not only to be successful in the market but to make sure one is not too early to market while the process of testing the hypotheses is still on.

o   What’s the outcome the MVP delivers to the buyer?

o   Are we enabling any of the following:

§  The product helps customers get an existing job done better.

§  Enable new customers do a job that others are already doing.

§  Help customers get more jobs done–often ancillary or related jobs.

§  Enable new customers do a job that nobody is doing yet; no product exists.

• Develop business model and GTM strategies – This is about understanding the market, defining the packaging and identifying routes to market. 

o   What’s the right channel for the product if ‘value’ and ‘stickiness’ metrics are favorable?

o   What is the chain of buyers in the target market/ industry?

o   Which segments represent most growth potential?

o   Which segments are declining?

o   What are customers really willing to pay for?

Here is an example of the metrics that I have used to measure ‘value’ and ‘adoption’.

 

 

^{References: 1 – The lean Startup by Eric Reiss; 2-Blue Ocean Strategy by W Chan Kim and Renee Mauborgne; 3-What Customer Want by Anthony Ulwick}