What makes a product successful?

• Customer centric product development makes for a successful product. Hand-balling product development to Sales and Marketing - is a sure-fire way to an expensive failure. Think for customers, give them a solution you think might work - talk to customers, and get their feedback before committing a billion dollars to a crazy venture.
• Fail early, fail quickly, and fail cheaply - and fail by letting customers decide.

Categories of Start-ups:

• new product into an existing market
• new product –> new market
• new product into an existing market and trying to resegment that market as a low-cost entrant
• new product into an existing market and trying to resegment that market as a niche entrant

Figuring out:

i. who your customer is, and ii. exactly what they want iii. and a product / service to meet those needs - that is your challenge.

a. New product into an existing market

• You have to compete on price or features. It has to be x10 compelling, or you’re gonna have a hard time.

b. New product in a new market

Large new customer base - who couldn’t do something before (efficiently) because of:

• costs
• availability, skill, convenience, location

in a way that no other product has done so.

c. Resegment an Existing Market: Niche

• Take away incumbent market share.
• Usually with needs not current met: e.g. more expensive or better quality items. e.g. In-n-Out burger - three items - high quality, fresh, great tasting.

• In established companies, the customer is more or less known. Products are built to support existing customers.
• In start-ups, the customer is not known. A product is developed to meet a need of an unknown market. Then we gotta verify that those needs are met, and that people are willing to pay for it. Customer feedback may come back - but the feedback is usually not visionary: it’s localised feedback, but it’s very useful.

Customer Design Process

• Have we identified a problem a customer wants solved?
• Does our product solve these customer needs?
• If so, do we have a viable and profitable business model?
• Have we learned enough to go out and sell?

1. You have a hypothesis.
2. Create a product on that theory.
3. Find a customer to fit the theory (rather than the other way around). You don’t want to seek a customer and then retro-fitt their “vanity features” upon your product. Keep it small and lean. You’ll learn a lot along they way as you talk to customers. There are often hidden blockages / information which need to be addressed.
4. Find out whether they will pay money for it. This willingness will be proportionate to the value they find in the product.

The entire process is incremental and iterative.

Product Development

• Write this down.

(A) Product Features (Product Hypotheses)

• Write down top 10 features.

(B) Product Benefits (Product Hypotheses)

• Write down major benefits.

(C) Intellectual Property (Product Hypotheses)

• Patenting anything? Infringing any?

(D) Dependency Analysis (Product Hypotheses)

What needs to happen beyond your control.

(E) Product Delivery Schedule (Product Hypotheses)

• Delivery of first release.
• Delivery and feature schedule of follow on products or multiple releases.

(F) Total Cost of Ownership / Adoption

Try to bring this down. e.g. do you need to buy a car in order to use this product? Or a computer?

Customer Hyptotheses

You must understand all elements of your customer, and especially the pain points.

e.g. if you’re selling to a bank, there are different people who have different needs, which are not necessarily aligned to an overarching need: e.g. bank president vs. branch manager vs. teller vs customer.

(G) Types of Customer (Customer)

• Saboteurs
• Decision Maker
• Economic Buyer (the one with the budget)
• Recommenders
• Influencers
• End users

Identify them, and the order in which you need to speak to them.

How bad does a customer need it?

• Mission critical or nice to have? If they already have some type of ad-hoc solution that is less than perfect, this ought to be music to your ears.

ROI Justification

I think it is important to have all of the customers aligned: everyone in the chain ought to substantially benefit.

Channel and Pricing Hypothesis

There are many distribution channels. Take the traditional ones:

(1) OEM (2) System Integrator (3) Value added Reseller (4) Direct Sales Force (5) Web / Outline (6) Dealers (7) Distributors (8) Retailers

Each have their own interests. e.g. Retailers basically want to a dump a product on the shelf, and do little to no-work to sell it. Resellers might hold your hand through the entire process a little more.

Pricing: Consider pricing for more than just one product

• Rather than think about just one product, think whether you can on-sell another product down the line.
• What are similar products charging? Can you do more / make it easier?

Find out whether people will use it for free. Then charge a riduculous price: “What if i charged a million bucks.” They might respond: “Are you out of your mind? This is not worth any more than $50,000” - they’ve stated, what in their mind, is their maximum willingness to pay.

Pricing: Creating Customer Demand

How are you going to market your product? Sales force? Trade shows? Word of mouth?

IMO self interested parties are the best marketing tool you can get. I do not want a “sales force”. i.e. human beings, who I have to train, and who are often less than ethical - in order to get a product into someone’s hands. I believe that the use, and the marketing should be self evident.

Market Type

1. New
2. Existing (Resegmented Market)
3. Well established

Resegmenting a Market

1. Be a low cost producer or
2. Finding a niche via positioning

• What existing markets are your customers coming from?
• What are the unique characteristics of those customers?
• What compelling needs of those customers are unmet by existing suppliers?
• What compelling features of your product will get customers of existing companies to abandon their current supplier?
• Why couldn’t existing companies offer the same thing?
• How long will it take you to educate potential customers and grow a market of sufficient size? What size is that?
• How will you educate the market? How will you create demand?
• Given no customers yet exist in your new segment, what are realistic year one-through-three sales forecasts?

New Market questions

• What are the markets adjacent to the one you are creating?
• What markets will potential customers come from?
• What compelling need will make customers use/buy your product?
• What compelling feature will make them use/buy your product?
• How long will it take you to educate potential customers to grow a market of sufficient size? What size is that?
• How will you educate the market? How will you create demand?
• Given no customers yet exist, what are realistic year one-through-three sales forecasts?
• How much financing will it take to soldier on while you educate and grow the market?
• What will stop a well-heeled competitor from taking the market from you once you’ve developed it? (There is a reason the phrase “the pioneers are the ones with the arrows in their back” was coined.)

• Is it possible to define your product as either resegmenting a market or as entering an existing one?

• How have the existing competitors defined the basis of competition? Is it on product attributes? Service? What are their claims? Features? Why do you believe your company and product are different?
• Maybe your product allows customers to do something they could never do before. If you believe that, what makes you think customers will care? Is it because your product has better features? Better performance? A better channel? Better price?
• If this were a grocery store, which products would be shelved next to yours? These are your competitors. (Where would TiVo had been shelved, next to the VCRs or somewhere else?) Who are your closest competitors today? In features? In performance? In channel? In price? If there are no close competitors, who does the customer go to in order to get the equivalent of what you offer?
• What do you like most about each competitor’s product? What do your customers like most about their products? If you could change one thing in a competitor’s product, what would it be?
• In a company the questions might be: Who uses the competitors’ products today, by title and by function? How do these competitive products get used? Describe the workflow/design flow for an end user. Describe how it affects the company. What percentage of their time is spent using the product? How mission critical is it? With a consumer product, the questions are similar but focus on an individual.
• Since your product may not yet exist, what do people do today without it? Do they simply not do something or do they do it badly?

Phase 2: Test And Qualify Your Hypotheses

• You might have an idea / hypothesis. Rarely will it survive untarnished. Get customer feedback on this point. Identify whether customers have this problem.

• Blank says use friendly first contacts to refer you to others. “e.g. Bob said I should call you”. Same with email: except you should fwd it to your contact, who will then fwd it to THEIR friends.

• Problem presentation: identify customer problems (ask them, or you already have some known ones), find out current solutions, but then suggest your new solution. This is designed to learn:

1. What is your biggest pain point.
2. If you could wave a magic wand, and change anything in what you do - what would it be?

• Understanding your customer: you gotta understand their pheripheral issues. e.g. are they dealing with other departments? And other vested interests?

Phase 3: Test and Qualify the Product Concept

1. Verify the problem
2. Verify the product solution

• Your features must solve the customer’s problem.

1. Verify the business model.
2. Assess whether to iterate or exit

• (Review the summary of this process on pg. 123.)