turning good ideas into great products

Zero to 60

Turning a Good Idea into a Successful Product

Agenda

• Ideas & Opportunities• Markets• Exercise• Business models• Features• More exercise

One Word: Plastics

Why the one word?

• Opportunity• Brand Completeness• Blocking competition• Raising money• Curiosity

Return on Investment

All your CEO cares about …

Returns (measurable changes)– Increased sales– Reduced costs– Achieving the mission (for a non-profit)

Investments (cost of making change happen)– Keeping headcount low– Using resources more effectively– Only bringing in consultants if necessary

Types of Opportunities/Ideas

Better Cheaper Niche New

I can do itbetter

I can do itcheaper

I can do itfor you

You neverknewyou needed it

How big is the opportunity?

Total Available Market (TAM)

Total Available Market (TAM)• How many people would want/needthe product?• How large is the market be(in $’s) if they all bought?• How many units would that be?

How Do I Find Out?• Industry Analysts – Gartner, Forrester• Wall Street Analysts – Goldman, Morgan

How big is my slice?

Total Available Market (TAM)

Served Available Market (SAM)

• How many people need or can use product?• How many people have the money tobuy the product• How large would the market be(in $’s) if they all bought?• How many units would that be?

How Do I Find Out?• Talk to potential customers

Served Available Market (SAM)

Your idea is worthless alone

Idea Execution Timing Dumb Luck

MARKETSWhat business will you be in?

Customer Development

Customer Development

CompanyBuilding

CustomerDiscovery

CustomerValidation

Customer Creation

Steven Gary Blank, Four Steps to the Ephinany

• How many of them are there?

• Are they price sensitive?• How big is their problem?• How often do they have

the problem?• How do they solve it

today?

Who are your customers?

New Product Conundrum

• New Product Introductions sometimes work, yet sometimes fail– Why?– Is it the people that are different?– Is it the product that are different?

• Perhaps there are different “types” of ventures?

Three Types of Markets

• Who Cares?• Type of Market changes EVERYTHING• Sales, marketing and business development

differ radically by market type

Existing Market Resegmented Market

New Market

Existing: founded 1938

Competitor founded 1972

Competing in an Existing Market

• Faster/Better • High end• Somewhere else

Resegmented

Gap’s new entry

Competing by resegmenting

• Niche = marketing/branding driven

• Cheaper = low end

New Market?

New

New Existing Resegmented

New Market

• Cheaper/good enough can create a new class of product/customer

• Innovative/never existed before

John Gourville, Eager Sellers and Stony Buyers (2006)

Deadpool

Type of Market Changes Everything

• Market– Market Size– Cost of Entry– Launch Type– Competitive

Barriers– Positioning

• Sales– Sales Model– Margins– Sales Cycle– Chasm Width

Existing Market Resegmented Market

New Market

• Finance• Ongoing Capital• Time to Profitability

• Customers• Needs• Adoption

Choose your idea

From Guy Kawasaki, Art of the Start

Ability to provide unique product or service

Value to customer

compete on price

stupid

bankrupt

The holy grail

WHAT IS YOUR IDEA?Exercise

Who are your customers?What is your market?

How big is the opportunity?

BUSINESS MODELSHow do we make money?

WHAT DO YOU USERS HAVE TO DO?

Who are you users?

Marketplace ModelAdvertising Model

Affiliate ModelCommunity Model

Subscription Model

I have always been a woman who arranges things,for the pleasure–and the profit–it derives.I have always been a woman who arranges things, like furniture and daffodils and lives.

Marketplaces bring buyers and sellers together and facilitate transactions. They can play a role in business-to-business (B2B), business-to-consumer (B2C), or consumer-to-consumer (C2C) markets. Usually a marketplace charges a fee or commission for each transaction it enables.

I’ll go where the buyers are

I want to find things!

I want the best price!

Can I trust this seller?

Users must find products, evaluate seller, and make a purchase

Advertising ModelThe web advertising model is an update of the one we’re familiar with from broadcast TV. The web “broadcaster” provides content and services (like email, IM, blogs) mixed with advertising messages. The advertising model works best when the volume of viewer traffic is large or highly specialized.

Users must:•Notice advertising•Interact with ad

Preconditions: User must visit advertising locationShare their demographic information

Types:CPMCPCCPA

Community ModelThe viability of the community model is based on user loyalty. Revenue can be based on the sale of ancillary products and services or voluntary contributions; or revenue may be tied to contextual advertising and subscriptions for premium services. The Internet is inherently suited to community business models and today this is one of the more fertile areas of development, as seen in rise of social networking.

Open Source Red Hat, OpenXOpen Content Wikipedia, Freebase

Users need to •Create an identity •Connect with other users •Build a reputation•Create and share content/work/etc

Users must care

Subscription ModelUsers are charged a periodic—daily, monthly or annual—fee to subscribe to a service. It is not uncommon for sites to combine free content with “premium” (i.e., subscriber- or member-only) content. Subscription fees are incurred irrespective of actual usage rates. Subscription and advertising models are frequently combined. Content ServicesSoftware as a ServiceInternet Services Providers

User must:•Able to evaluate the offering• Subscribe and unsubscribe to offering•Realize value offered

Combos

Advertising Community

Combos

Advertising Community

Subscription

Combos

Marketplace Community

Affiliate

1, 2, 3Prioritize and Sequence

Pattern:User gets valueUser returns, gets more

valueUser reciprocates

User adds contentUser contributes money

Wikipedia:Looks up contentKeeps finding more

contentSees error, correctsUser donates

HOW DO YOU MAKE MONEY?Exercise

Marketplace ModelAdvertising Model

Affiliate ModelCommunity Model

Subscription Model

FEATURESAnd now let’s do less

The AOF Method

1. Defining your Activity2. Identifying your Social Objects3. Choosing your Features

Courtesy of Joshua Porter. Check out bokardo.com!

Business Model Questions • Who are your users?• What will they pay for?• What do you need them to do?

Feature Questions• What are your users doing?

• What do people have to do to make you successful?• What are you making people better at?• What are your users passionate about?

2. Identifying yourSocial Objects

What are Social Objects?

• Social objects can be ideas, people, or physical objects.

• By interacting through/with social objects, people meet others they might not otherwise know.

• Social objects can be the reason why people have an interaction or form a relationship.

Joshua Porter (bokardo.com)

3. Choosing your Features

LET THE CUSTOMERS CHOOSEThe roadmap

Customer Development

Customer Development

CompanyBuilding

CustomerDiscovery

CustomerValidation

Customer Creation

Steven Gary Blank, Four Steps to the Ephinany

Voice of the customer Interview

• What we are doing• A lot about you• What we’ve

heard/Problem statement

• Solution Overview• Demo (clickable

mocks!)• Limitations

• Potential roadmap• Justifications• Procurement

– Who’s our competitor– Who’s not here to

decide?

• How would you describe this to a colleague?

• Homerun/strikeout?

SyncDev http://www.productdevelopment.com/

66

Potential Roadmap

• Collaboration space• Speaker features/video

Cap

abili

ty

Soon Later Much Later

What would you move?

• Reporting and advanced Admin

• Community features• E(mail) to attendees

Version 1.0• Un/Official

events list• Network

notifications• Basic Admin

Pricing

• Part of the business model– How do we make money? How much?– Revenue/profit/shipment forecasts

• Supports core value proposition– “Our product/service saves you $$$$…– …and we want 15% of the savings.”

• Often an obstacle to buying– Too complex– Much too high (sticker shock) or too low (desperate)– Free (no reason to trade up)

Designing pricing

• What’s the natural unit of exchange?– How do they derive value? – What does the competition do?– Can you split off a profitable segment?

• How much of customer value can you capture?• Test, trial-close, get your hands dirty

Software Pricing Models

1. Time-based access (e.g. unlimited/month)2. Transaction (stock trade)3. Metered (seats, CPUs, named users)4. Hardware (appliances, dongles)5. Service (virus updates, support)6. Percentage of incremental revenue/savings7. Data-driven insights

Pricing drives customer behavior

• What do you want core customers to do?– No-brainer renewals (small monthly fees)– Big up-front license (lock up marketplace)– Lust for upgrades (cool features are extra)– Freemium model (1% upsold into paid services)– Install latest version (free updates, increasing

service– fees)

WHERE ARE THE USERS?Distribution

Why

• If you build it… they don’t come

Charter Clients

SEO & SEM

SEO SEM

Private Betas

• Works if you know cool people• Classic influence concept of Scarcity• Good for user feedback

Think about how you will pull people in…• How do people share?• With whom do they share?• Where and how many of those tools do you

place?

Distribution Exercise

10 Questions1. Exactly what problem will

this solve? (value proposition)

2. For whom do we solve that problem? (target market)

3. How big is the opportunity? (market size)

4. What alternatives are out there? (competitive landscape)

5. Why are we best suited to pursue this? (our differentiator)

6. Why now? (market window)7. How will we get this product

to market? (go-to-market strategy)

8. How will we measure success/make money from this product? (metrics/revenue strategy)

9. What factors are critical to success? (solution requirements)

10. Given the above, what’s the recommendation? (go or no-go)

Marty Cagen http://www.svpg.com/blog/files/assessing_product_opportunities.html

Questions?

@cwodtkecwodtke@eleganthack.com

appendix

Return on InvestmentAll your CEO cares about …

Returns (measurable changes)– Increased sales– Reduced costs– Achieving the mission (for a non-profit)

Investments (cost of making change happen)– Keeping headcount low– Using resources more effectively– Only bringing in consultants if necessary

“ROI” is just a fancy estimate accountants use to make decisions

About Business

Things you should know to have a conversation

Profit and Loss

Investment vs. expense

Location Location Location

The Fish MarketStock

Location

Advertising

Differentiation

Diversifying

Pricing

Got Metrics?

Do you know what matters?

Web Experience Metrics

Development: Reduce Costs

• Development Costs• Development Time• Maintenance Costs• Redesign Costs

Sales: Increase Revenue• Transactions/

purchases• Product sales• Traffic, audience size• Customer retention• Appeal• Market Share

Use: Improve Effectiveness• Success rate/user error• Efficiency/productivity• User Satisfaction• Job Satisfaction• Ease of use• Ease of learning• Trust• Support costs• Training/documentation

Return on Investment for Usable User-Interface Design, Aaron Marcus

User Experience Also Influences…Web Metrics• Total page views• Page views per session• Click paths• Unique visitors• Return visitors• Conversion rate (sales,

reservations, applications, etc.)

Business Metrics• Leads• Sales• Retention• Length of sales cycle• Productivity• Development costs• Customer Satisfaction

What market are you in?

Media•Advertising

•Subscription

•Single purchase

Commerce•Profit margin

•Customer retention

Broker•Transactions

•Users

•Liquidity

Why the one word?

• Opportunity• Brand Completeness• Blocking competition• Raising money• Curiosity

Business creates value for which they receive money

Money allows them the resources to provide value

ROIReturn

Investment

Everything You Need to Know About ROI (in one slide)