A few weeks ago I was invited to speak at the Rincon Venture Partners Annual CEO Summit in Santa Barbara. I was fortunate to be there – it was an incredible group of startup founders, investors and executives. My talk outlined ways that software companies can evaluate which products and markets provide the greatest opportunity.
The fact is it’s tough to be successful with new products, even for mature software companies. The bulk of new product initiatives fail or sputter along with mediocre results.
Over the years of working with software startups as either an early employee or advisor, I’ve learned that getting products out the door is not typically the primary challenge. There are usually great development processes in place (Scrum for example) to build high quality products.
The real challenge: product teams and executives rarely have a process for evaluating the right things to build in the first place. Product teams need a process to evaluate market opportunities, reduce new product risk, and put the right things on the product roadmap.
Truly great product teams blend entrepreneurial instinct with evidence they’ve gathered from the market to make intelligent product decisions. They have first built a culture to ask the right questions and validate opportunities objectively. Here are a few characteristics I’ve seen that set the stage for building the right products:
- A small, multi-disciplined team evaluates opportunities. The ideal team is eager to engage early with prospects, is problem-focused, and has an experimentation attitude. Teams include design and engineering specialists and occasionally have a member with a sales or marketing background.
- They focus on problems first, product second. Great product teams deeply understand what the customer problem is before outlining the product and features. I’ve seen many companies launch the right technical product, but miss the mark because they haven’t understood the customer’s core problem.
- They validate critical products and features. Ideally the product team is working three or more months ahead of engineering to validate new product initiatives including major features and partner integrations. Just as they would for a new business, they create a hypothesis and methodically test the minimum feature set, price, and acquisition model. Although back-of-the-envelope financials may be a part of the early discussions, there is greater emphasis on validating how well the product solves customer pain.
- There is a focus on quality customer interactions rather than quantity. The best early insight comes from deep customer interviews. For example when I conducted the market validation for GoToMeeting (acquired by Citrix), our small team held in-depth interviews with 30 prospects to guide major decisions about the initial market, value proposition, product features, and pricing. Surveys, split-tests and other quantitative data supplement the deep customer insight.
- They sell it early. These teams learn early whether they can presell customers using prototypes before investing in expensive engineering. They keep iterating and revising the pitch until they can consistently get positive signals that customers are willing to buy.
Product teams often have opportunities coming at them from many different directions, making it challenging to choose the right path. But companies can put in place processes at the “fuzzy front end” of product design that improve the odds of getting the right product on the roadmap and in the development pipeline.Continue reading