As an engineer, to succeed in product development, you have to change your perspective and move from valuing technology or the product to focusing on the business model. As an entrepreneur or a product manager, you have to understand that you are not developing a product but a business model. A product manager must continually ask themselves the question: What is the minimum experiment I should do next to minimize uncertainty (or learn) the most?
Using the question as a guide will help you get the evidence that the people need the product and there is sufficient market for it. You don’t require a large budget, scalable architecture, and a large team before validating the product-market fit.
Ash Maurya model is one of the models used to explain the lifecycle of the product. According to the model, there are three phases in the lifecycle of a product.
- Problem-solution fit
- Product-market fit
In the diagram, you can notice how the revenue, risk, and investments move up or down as you progress in the journey of product development.
The Build-Measure-Learn (BML) cycle is an iterative process to reduce uncertainty and risk. You will build different artifacts at different stages of the product’s lifecycle based on the risks that you want to mitigate through BML and the budget that you have available.
We will discuss how you can use BML cycles in the various stages of product development. Let’s now discuss the phases of the product lifecycle in detail.
At this stage, we need answers to two questions:
- Is this a problem worth solving?
- Do we have a solution to the problem?
To learn more about the problem and the possible solution, use the Build-Measure-Learn (BML) cycle to discover the potential customers and their problems. The following is a brief description of the stages involved in the cycle:
- Build: Find where your customers are and interact with them.
- Measure: Perform primarily qualitative assessment at this stage, e.g., customers landing on a page or signing up to receive more information.
- Learn: With every iteration of the cycle, refine the customer segments and their needs. After the final iteration, you should have a good mapping of the customer segments and the root cause of the problems that they are facing.
In this stage, the BML cycle can be implemented as a continuous loop of lean experiments that consist of the following steps:
- Hypothesis: It is an assumption about a customer’s problem. The recommended statement model for a hypothesis is: “We believe we will achieve this [business outcome] if [these users/customers] can [achieve these benefits] with [this functionality]” e.g. “We believe we will reduce order cancellation rate to 7% if our customers can have greater transparency about the status of their order with a chat channel with the courier”. The hypothesis forms the basis for the experiment.
- Design experiments: Activities that you will undertake for validating/refuting your hypothesis and parameters to measure it. You can use customer interviews, surveys, prototypes, marketing materials, and landing pages to build the experiments.
- Test: Execute the experiments.
- Insight: Document your learning and its impact on the metrics. Insights during discovery will mostly be qualitative (WHY), and in later stages, quantitative (WHAT, HOW MUCH, and WHEN).
Product-Market fit means bringing the right product to the right market. At this stage, you must quantitatively demonstrate that you are delivering monetizable value to the market. The key questions to answer at this stage are:
- Is this product viable/profitable?
- Is this product feasible/can you build it at scale?
You can use the BML cycle in this stage to answer the questions:
- Build: Create Minimum Viable Product (MVP) with different levels of fidelity: Wireframes, interactive prototypes, and live product. You can test the prototypes with the customers through interviews or workshops.
- Measure: Measure product traction based on the nature of the product. If the product is designed to deliver value once, e.g., cars, wedding planners, etc., measure the activation metric. For products that provide value with repeated use, e.g., SaaS, online business, measure the customer retention/engagement.
- Learn: Ask customers the question: “How would you feel if you could no longer use [product X]?” with the four possible answers: “Very disappointed:,“Somehow disappointed”, “Not disappointed”, “Don’t know”. In general, if more than 40% of customers respond with “very disappointed”, then you have the right product-market fit.
To monitor the success of a product that has the right product-market fit, use the following metrics:
- Retention curve: Percentage of customers using the feature with time.
- Direct traffic: Number of new customers landing on your product. In general, customers will discuss the right product with others leading to an increase in user base.
The Lean canvas is an excellent tool for laying out a business plan created by Ash Maurya. You should start adding content to your business plan/lean canvas at this stage.
Before scaling your product, you must be able to demonstrate product-market fit. Do not abort your business model and continue to iterate on it in light of new competition, technological improvement, and increased customer expectations. You must continue to drive incremental innovation and continuously scan the market trends.
Use Agile to scale the execution. Keep using Lean to explore new product areas and features. A Product Manager must ask themselves this question on every iteration of the product lifecycle:
- Kill: Should we stop investing in this idea/project/functionality/product?
- Pivot: Should we correct the course?
- Persevere Should we continue?
It would be best to kill an idea when you cannot achieve the problem-solution fit and the product-market fit. And despite several attempts, kill the project when it seems that you cannot scale sales significantly.
If you decide to test a new hypothesis about the product, the business model, or the growth engine, you can choose one of the following pivots:
- Zoom-in: What was previously considered a single feature in a product becomes the whole product.
- Zoom-out: What was previously considered the whole product becomes a single feature of a much larger product.
- Customer segment: A change in the customer segment you are targeting.
- Customer need: A change in the problem or need addressed by the product for a given customer segment.
- Platform: Changes from application to platform and vice versa.
- Business architecture: Switching from B2B to B2C or vice versa.
- Value capture: The monetisation or revenue model.
- Engine of growth: Changing your engine of growth (sticky, viral, and paid).
- Channel: Changes input the mechanism by which a company reaches their customers.
- Technology: When a new technology can provide superior benefits or performance.
Pivoting during the problem-solution fit stage and the product-market fit stage is easy and inexpensive. Pivoting during the scaling stage is complex and rare.
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