When we are working with innovative early stage digital products, it can be hard to set objectives and plan ahead. You might have stakeholders who are used to using mature products in their everyday lives, and expect your product to behave in the same way. It can also be hard to feel progress, and you can get stuck in cycles of learning and building.
At ustwo we work with a range of products at different stages of maturity, but we have a particular passion for early stage products. We know how important it is for everyone on the team to understand the journey ahead, to plan and prioritise work and to understand when they are being successful. We often think about products as following these key stages, which we call the “product journey”:
- Product / Solution Fit
- Product / Market Fit
- Growth (or Product / Business Model Fit)
Every product comes from somewhere. Successful organisations are able to recognise an opportunity when they see one, whether it is a bright idea, an under-served customer segment, a new technology or a new entrant to the market.
A well defined opportunity needs a few key ingredients:
- Desirability - A sense of who your users might be, and a sense of what their needs are.
- Feasibility - A rough idea of how technology could solve this problem
- Viability - A sketch of a business model - how could this product create value for the business? Will it generate revenue, or be funded through investment?
The key point about an opportunity is it is not yet validated - you have a set of assumptions and hypotheses about how your product might work, but you haven’t tested them yet.
When we are trying to progress an opportunity, we start by making sure that we have framed the problem well, and that means that we need to connect with potential users. Research at this stage is generative and focused on framing the problem well - we want to understand how this user group thinks and behaves before we start trying to solve their problems.
As we start to understand their problems we can start the process of ideation, in which we develop candidate solutions to users problems and test them iteratively. This type of formative research helps us narrow down our focus onto a tightly defined user group, a tightly defined problem set and a candidate solution. As we define our problem and solution we map our assumptions across our key focus areas of desirability, feasibility and viability, and we use research as our main tool for validating these assumptions.
- A sense of a user need, a potential solution and a business model.
- A set of unvalidated assumptions.
- No product in the market.
- No revenue generated.
- Generative research to frame the problem well
- Ideation and formative research to propose and prioritise solutions
- Mapping out assumptions (across desirability, feasibility and viability)
- Establishing how technology can solve the problem
- Identifying the key elements of your target business model
Product / Solution Fit
As we continue research and ideation, we begin turning our assumptions into actionable data. When we have a high confidence that we have understood a problem well and that we have a solution (or set of solutions) which is desirable, feasible and viable, we have reached Problem / Solution fit.
At this stage, our next priority is to get the product some market exposure as quickly as possible. Every new product has hidden assumptions the team hasn’t accounted for - user behaviours that haven’t been observed, technical barriers that haven’t been considered and business model decisions that need to be made (or unmade). If a team is set up to learn and respond to new data, nothing beats market exposure for making a product better. You can get market exposure by:
- Creating working prototypes - for users to test in controlled conditions
- Creating a lightweight alpha product - Alpha products are typically limited in features and not built in a scalable way, but they can help you challenge your core assumptions about a product early.
- Creating a beta programme - Beta products are typically built on the same foundation as mature products, and a beta programme will allow you to test your product with real users over a longer period of time. This is essential for uncovering hidden attitudes and behaviours that are harder to get unless a user is engaging directly with a real product over a longer period of time.
- Launching early - Nothing beats a product launch, and if you don’t have a brand to protect or an investor and stakeholder group to please, just get your product out there and start learning.
Exposure to the market will uncover hidden assumptions and opportunities, and so it is crucial that user engagement and research continues throughout this process. Your key aim in this phase is to get a small group of users returning to the product regularly and completing a task which is valuable to them. This is called Product / Market Fit...
- Key assumptions are mapped out, understood and tested through research.
- Assumptions can be categorised into desirability, feasibility and viability.
- The first version of the product has been created and exposed to the market.
- Many products at this stage will not be generating revenue.
- Creating the first version of your product to test uncover hidden assumptions.
- Testing the product in the market
- Learning from how the product performs and reprioritising development accordingly.
- Iteratively improving the product
- Measuring product performance in order to establish when you have reached Product / Market Fit
Product / Market Fit
If you are able to show that a group of users is returning to your product regularly and completing a task which is valuable to them, you have reached Product / Market Fit. There are lots of different takes on what this means in the industry, but if you only read one of them, I’d recommend the post that started it all, Marc Andreessen’s 2007 blog post.
Reaching Product / Market Fit is a crucial milestone in a product’s journey, because you have proved that you have solved a user problem with the product you have created, and you can use that as a basis for future growth. In particular, a product that has reached Product / Market fit should be able to retain users for a significant period of time, and so you can spend money on acquiring new users. The average cost of converting prospective customers into a active users is now much lower, and so you can begin thinking about growth.
There are different ways to measure whether you have achieved Product / Market Fit, and in this post we have mostly talked about user engagement. That is, showing that a number of users are returning to the product regularly to complete a task which is valuable to them. The problem with this measure is it is a trailing indicator, meaning that you can only measure it by looking at user data over a period of time, and so it can take a little while for you to realise you’ve reached an important milestone. In some cases, what you need is a leading indicator, and no blog post which talks about Product / Market Fit would be complete without referencing Sean Ellis’ excellent blog post in which he proposes a leading indicator:
“I ask existing users of a product how they would feel if they could no longer use the product. In my experience, achieving product/market fit requires at least 40% of users saying they would be “very disappointed” without your product.”
However you measure it, reaching Product / Market fit is a crucial stage and worthy of celebration - it means you can deepen your engagement with users, focus on product growth, and seek further investment for the future. It also means you can experiment with your business model so that you are able to fund future growth when investment runs out.
- An active community of users are regularly returning to the product and getting value from using it.
- The group of active users may be small, but provided they represent a type of user that you can acquire easily, they are a foundation for future growth.
- Products that have achieved Product / Market fit may generate revenue, but may not be able to generate profit yet.
- Iteratively improving the product to deepen user engagement.
- Seeking other user segments who could grow the user base.
- Testing the business model to arrive at something which is cost effective at scale
Growth (Product / Business Model Fit)
Once a product has achieved Product / Market Fit, it is time to focus on growth. When thinking about growth at this stage it’s worth returning to the framework we used for assumptions mapping at the start of our journey:
When trying to grow your user base, ask yourself three questions:
- How can we attract new users? Have we optimised our acquisition channels fully? Are there types of users within the addressable market that we aren’t fully serving yet?
- How can we deepen value with existing users? Users who value your product will engagemore often and recommend the product to their friends
- How can we bring disengaged users back? Why do users stop using your product? What are their frustrations? What are the alternatives they are using instead? How do we attract them back?
Products in their growth stage need to operate at scale. For your engineering and operations teams, this means identifying limiting factors to growth and finding ways of removing them. Examples of limiting factors include:
- Technical limits (e.g. the number of simultaneous users, geographic coverage for server locations)
- Human processes (e.g. service desk responses)
Keeping a product feasible and competitive during the growth stage involves developing a deep understanding of your limiting factors and actively seeking solutions - often through internal innovation, but also through partnerships with other organisations.
At the growth stage you need to set your sights on a viable, profitable business model. This means either:
- Arriving at a pricing strategy is attractive to your customers and driving down the cost to serve each customer so that your product can become profitable in future
- Identifying other ways your product provides value to your business and making sure you have a good case for continued investment. This could include diversifying your business, creating a channel for customer acquisition, or just because the positive impact of the product aligns with your company values.
- User numbers are increasing, and users are becoming more engaged with the product.
- The product is typically generating revenue (or other forms of value for its parent organisation) and may be profitable.
- Driving user growth by finding new users, deepening engagement with existing users and persuading disengaged users to return.
- Optimising processes by removing limiting factors to growth.
- Arriving at a stable, profitable business model.
By understanding where your product is on its journey, it becomes much easier to set realistic goals and feel a sense of progress as you move towards them. This is critical for keeping your team motivated, and helping your stakeholders understand what success looks like at each stage. For many teams who try to take a concept and turn it into a mature product for the first time, it can be easy to get lost along the way.
You start with lots of curiosity, enthusiasm and excitement, then as you realise how long the road can be, it can feel hard to find focus. For people used to just using mature products in their everyday lives, it can suddenly start to feel like success is impossible. Just remember:
- Start by understanding a user group and problem as best you can and with an open mind, and come up with some ideas you are confident in (product / solution fit)
- Show you can solve that problem with just a small group of people, and keep them coming back (product / market fit)
- Show that you can scale that product so that it can create enough value for your business (product / business model fit)
If you’d like to talk to us about your product lifecycle or a project you’re exploring, please get in touch with us.