Rethinking Product Management Towards New Horizons
There has been little change in the way well established organisations have been led. Once a corporation had established its high position and built long-lasting market barriers to protect itself from new entrants, a day in the life of a business executive basically focused on managing the company’s power and doing politics.
In an era of predictable demand and offer, the formula to execute a strategy was based on certainty — controlling internal performance indicators, market share and competition was enough. It was rare to get surprised by new variables in this equation.
This corporative reality has undergone drastic changes over the past several years, caused by technology and consumer behaviour disruptions. Suddenly, regular people started to seriously challenge the status quo and hack the corporate way of doing business. Uncertainty became an integral part of an executive routine.
As never before, consumers have a vast number of alternatives to solve their problems, whether it is by buying from new innovative entrants or by building their own solutions using do-it-yourself tools. If a big corporation does something they are against, for example, they can join collaborative communities and do relevant activism with convenience and without taking much risk.
The freedom workers have to choose the company they want to work for and the career they want to pursue is astonishing. For example, if they don’t believe in the values of the organisations available in the market, they can easily found a startup. If for some reason they decide to change their careers, they can cheaply learn new skills by themselves. If the society they are living in doesn’t give many opportunities, they can immigrate to another country or work remote and live a nomadic life.
As I mentioned in the first blog post of this series, facing a reality of continual disruption, current corporate organisational strategies and structures have failed to keep pace with the rapid rate of innovation.
The new way of doing business is focused on people
The good news for business leaders is that these disruptive factors have been here for decades already and new tools are available to effectively deal with this new reality. I’m talking about a new way of building products that has been used by the most creative and innovative companies, and which has been continuously validated and optimised.
This new approach is a combination of different fundamentals that has its core centred on customer value, experimentation and trust. For now, I will call it Lean Product Management, a keyword that is also related to Lean Startup, Design Thinking, Growth Hacking and Community Building.
I have been using this new method of building products for over six years and have successfully used with different teams and types of business, from startups to corporations. What you are going to see next is a personal compilation of its principles and techniques.
It still has a lot of evolving to do, and it is definitely an ongoing process. However, what I can guarantee is that everything here I had hands-on experience with and tested at a minimum level, which makes me comfortable recommending it.
Finally, I would say that whether used for incremental or disruptive innovation, these fundamentals are the core of the organisation of the future.
The Lean Product Management Mindset
The importance of understanding the mindset of a method is to envision its key principles, and to have flexibility when implementing it. It give us the ability to know why and when to use it, and how to customise it and evolve it without losing the right direction.
To understand the Lean Product Management fundamentals it is crucial to know what innovation, value, and experimentation is, and the importance of prioritisation.
What is innovation?
According to Steve Blank’s definition, one of the best in my opinion,
“Innovation is satisfying users current or future wants/needs by turning an idea into a product or service with speed and urgency, using minimal resources and costs”.
What makes this description so good is its focus on the core goal of every business, which is to sustainably deliver and capture customer value. Happy customers get you paid and doing this repeatedly and efficiently is the goal of every business.
It also talks about sensing and responding fast to the rapid pace of change, which is related to prioritisation. And, it sheds some light on the importance of knowing how to compete by creatively using limited resources.
What is value?
If innovation is the process of producing solutions which satisfy unmet needs, the value of it is in how it helps users to get the jobs they need to do, done. Lean Product Management defines customer needs as Jobs To Be Done. In this way, products create value in the marketplace based on how well they do the job better than other alternatives.
What is Experimentation?
Corporations have traditionally relied on elaborating perfect business plans to launch new businesses and products. However, new products have been operating more and more under conditions of extreme uncertainty.
What innovative companies like Google, Amazon, Uber, Airbnb, and Facebook do to sustainably deliver and capture customer value is employing a healthy culture of experimentation in everything they do.
Experimentation is about doing empirical testing through experiments. Basically, like a scientist, you build models of customer behaviour and run experiments to validate those models. Doing that iteratively, starting small and scaling over time is what Lean Product Management is based on.
The Importance of Prioritisation
However, we can’t do experiments of everything we want. Prioritisation is key in Lean Product Management. Every business is a system of interconnected processes with a single constraint. At any given point, there are only a few key actions that matter.
Focus on those key actions and ignore the rest. Truly agile companies do continuous improvement through the elimination of waste in the customer value stream.
Putting It To Practice
This mindset impacts all the areas of building a product, including ideation, delivery, launching and management. Actually, it changes the way we look at the lifecycle of a venture. Traditional business methods are used to run an organisation on the Execution mode, which is centred on growing a validated and well established business model.
However, to successfully build products that operate under conditions of extreme uncertainty it is crucial to know how to search for new business models as well. We called it the Searching mode, when the goal is to find product/market fit — the match between what the company is building and who will buy it, which typically takes multiple iterations and pivots.
A very different approach than the traditional ‘plan, execute, monitor’, is needed when focusing on finding the product/market fit. Almost every detail of the strategy — customer segments, value proposition, product features, channels, revenue model — must be considered assumptions to be validated, which is done by iteratively testing it and improving it in small-scale first.
To better explain how to use Lean Product Management I am going to use the four stages of building, launching and managing a product from scratch — Business Modeling, Proof-of-Concept, Traction, Scale.
Business Modelling
The starting point must be the vision of the opportunity. For example, a market that has tonnes of potential customers with unsatisfied needs which can be a satisfied with a unique new proposal. The key difference from a traditional business plan, is that in Lean Product Management the process of defining the right strategy is by iteratively testing it.
Following are some of the best practices when modeling the business.
- Strategy modelling: establishing a business plan overview that lays out its crucial parts in one page model and makes it actionable to validate assumptions of product, market and scalability.
- Value proposition modelling: centred around customer value creation it is a simple way to understand how our products and services create value for the users, which gets us to rigorously test our ideas with them before implementing it.
- Customer journey modeling: understanding the entirety of the customer experience from their own point-of-view by mapping the practical nature of customer lifecycle and highlighting their thoughts and emotions. Mapping the existing pain points between the alternatives in the market and our customers drive us to ideate a compelling, unique value proposition.
- Solution modelling: after understanding the problem from our target perspective, we get to sketch solutions. Following a process that emphasises critical thinking over artistry, we weave the sketches into a storyboard turning it into a step-by-step plan for our prototype.
Proof-of-Concept
After exploring and immersing with the customer’s problem point-of-view and ideating possible solutions, it is time to create prototypes and test. In the Proof-of-Concept stage, the goal is to validate Product/Market Fit qualitatively by doing small-scale experiments.
The main idea is to focus on validating the core hypothesis of the business model and uncover valuable insights with real customers, before focusing in building the product and getting traction.
A good way to start this stage is setting up a Validation Board, where we formulate the key hypotheses of our business model, the experiments we can design to validate those assumptions, and the minimum success criterion to continue.
To design the experiments we must ask ourselves what we need to learn and what the key and riskiest assumptions to be validated are. Usually, a experiment contains at least the unique value proposition, a demo of how the solution works, and pricing.
After formulating a plan to validate the key business model hypothesis it is time to get out of the building. Running an experiment usually consists of generating leads of target customers, making them use the prototype, interviewing them, and analysing the results. It is absolutely crucial to let the users judge the experience in a real situation.
The Proof-of-Concept phase is concluded when the experiments done so far qualitatively prove that the customer’s problem is worth solving and our solution solves it better than the current alternatives available in the market.
Traction
At this point, we are probably feeling very enthusiastic and are confidently thinking to put our foot on the accelerator and grow the business. But it is time to calm down. We haven’t faced the biggest challenges of the journey yet and will probably have many experiments and pivots ahead.
Paul Graham, co-founder of Y Combinator, developed a graph that illustrates very well that struggle of getting a new product off the ground. The Trough of Sorrow is so prevalent because the path to success is not a curve that grows exponentially straight up from the beginning like popular depictions may have us believe.
One of the biggest challenges of getting traction is crossing The Chasm, which is the gap between early user adopters and the mainstream market. During the Proof-of-Concept phase, there is a big chance that we had validated the business model only with the types of customers which are to the left of this gap.
To get traction, we will need to focus on achieving Product/Market Fit with the customers that represent the majority of the market as well. At this stage, we are still in the Searching mode. The main difference from now to the previous Proof-of-Concept phase, is that we need to focus on organically growing our user base while we continue iterating through experimentation.
To do this we must analyse the performance of the Customer Lifecycle — the progression of steps a customer takes through our product, from being aware of it to regularly using it and passionately referring it to others.
When we are starting to focus on getting traction our priority must be to first improve Activation and Retention. As soon you have understood what factors turn users into active ones and optimised your product, then you can work on getting more people in the top of the funnel.
One of the biggest shifts between traditional methods and Lean Product Management is how it is centred on the customers instead of the business itself. The key of success is not about who does the best product, but about who gets and keeps customers.
In short, to get traction a product team must focus on three main goals:
- Driving value to users — building the right thing faster and cheaper using Lean and Agile.
- Turning users into passionate customers — identifying the most effective ways to build and engage the user base using Growth Hacking.
- Building a brand that is loved — developing collaborative communities of passionate customers and influencers using Community Building.
Using a combination of Lean and Agile methodologies can help us to drive value to users by systematically testing our plan. We can make use of a Build-Measure-Learn mindset by using data to optimize and take strategic decisions about product’s future, as well as to incrementally learn from fails.
We can transform our product roadmap, backlog, and kanban board to focus on building experiments. Instead of focusing your sprints on delivering working software only, we can concentrate our efforts on delivering working desirable products.
To achieve the goal of turning users into passionate customers we can make use of Growth Hacking best practices — a process of rapid experimentation across marketing channels and product development to identify the most effective ways to build and engage the user base.
It is based on analysing and segmenting the user behaviour through the Customer Lifecycle and the Customer Profile. First, we focus on identifying what kind of customer performs best and gets more of them.
Next, we figure out how to move users from one stage to the next by identifying what factors turn users into active ones and optimise it with A/B Testing. Finally, we concentrate our efforts on building a habit-forming product that works deeply in the user behaviour.
To build a brand that is loved we can use Community Building methods to create a relationship with our customers instead of a transaction. Based on the fact that the two scarce elements of our economy are trust and attention, having a brand that influences its customers as a trusted advisor can be an Unfair Advantage because it cannot easily be copied or bought.
The content strategy and execution must be treated as an important part of our product, where authenticity and transparency are key to build an unique story. If we truly believe in embracing a culture of openness and building purpose-driven ways of doing business, people will naturally follow us.
The Traction phase is concluded when the data quantitatively proves that the customer’s problem is worth solving and our solution solves it better than the current alternatives available in the market. To define the metrics model that our product needs to perform to validate the Product/Market Fit success, we need to start by asking the right questions.
Here are some examples that can be used:
- People understand the product?
- Some subset of users like it and use it?
- Which users fall into the target market? Which don’t?
- Signups are happening?
- Recurring usage from target users is happening?
- How metrics compare to the usage model?
The metrics performance we want to see is something similar to that:
- 10% Conversion Rate
- 100’s of signups/day (organically)
- 25% of users use the product every month
- 30% of users are active the day after signup
- Clear path to 100,000 users
Scale
The Searching mode is over and it is Execution now. To scale our goal is to have more potential customers coming to the top of the funnel and to increase and optimise the acquisition and referral steps. Some examples of initiatives are referral campaigns, viral loops, paid acquisition, public relations, new channels, and venture acquisitions.
Internally, it is time to clean up the mess. During the previous phases, we had focused on taking shortcuts to achieve Product/Market Fit as fast as we could. Probably, these shortcuts added up and became technical and organisational debt, which can be a serious bottleneck when we want to grow at the speed of light. At this point, we will need a process organisation dedicated to refactoring our technical and people structures.
Team Characteristics
When building products using a Lean Product Management approach the ideal team formation has the following characteristics — small (5–9 people), long term allocated, cross-functional with end-to-end capabilities (product management, software engineering, user experience design, growth hacking, community building), and senior level leadership.
It is absolutely crucial that the team has the autonomy, ownership, and responsibility to invent on behalf of users and to deliver new products and features that meet customers’ rapidly growing needs, as well as to identify bold moves to grow the business and to represent executive leadership.
They need to move quickly, with a focused determination to get things done, delivering timely and successfully, anticipating bottlenecks, making tradeoffs, and welcoming an acceptable level of risk to maximize business benefit.
Finding people with the right profile is not just about analysing their know-how, but it is very important to understand what they believe too. This new way of building products requires a unique set of values — courage, humility, trust, open-mindedness and belonging.
Conclusion
I see Lean Product Management as a combination of different fundamentals that has its core centred on customer value, experimentation and trust. The methods and techniques I put together in this compilation are just ways to illustrate how to apply these principles, and to give us a set of minimum tools to start implementing it.
I have used this approach to launch new products from scratch, as well as to improve products that have millions of active users and thousands of subscribers. Even considering the different particularities of both situations, the principles I implemented were the same.
Whether in a startup or in a corporation, Lean Product Management is probably the most effective approach to build, launch and manage products that get and keep more customers.
Inspiring Examples
Two years ago, I had the chance to lead a team in creating a new product called Foodastic. Here is the story of how we used the Lean Product Management principles to launch it.
Airbnb is one of the companies that best use these fundamentals, and it is one of my favourites. Check out this new product launching and get inspired by their approach.
This is the second blog post in a series about Corporate Innovation. Read part one on The enterprise as it currently stands needs a reboot.
