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.
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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
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