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How to create winning products with the new MVP
The Maximum Value Proposition
MARKETFIT
Alan A lber t
© 2015 Alan Albert All rights reserved
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Agenda
Intro State of the Art
Customer Values Maximum Value Proposition
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Alan Albert
marketfit.com [email protected]
@A_Albert
© 2015 Alan Albert All rights reserved
Strategic Consulting for Measurable Growth
MARKETFIT
I’m the president of MarketFit, a strategic consultancy that helps companies grow.
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ProductMarketing
DevelopmentCustomer ServiceQuality Assurance
StrategyCEO
B2B Products & ServicesB2C Products & Services
StartupsBootstrapped
Venture-fundedSMB
Fortune 500
Cognitive PsychologyComputer Science
$1B
AdvisorInvestorDirectorChair
Databases Personal productivity Business intelligence
E-commerce Financial services Social networking
Education Knowledge Management Home Grocery Shopping
Online security Real estate software
Video software Scheduling software
Process Control Publishing
Brick & mortar retail Personal computing Enterprise software
SaaS / Cloud computing Industrial technology
Software development UI / UX
Information architecture Input / output devices
Mobile devices Corporate strategy
Corporate partnerships Marketing automation Online marketplaces Consulting services
I’ve been fortunate to work in a wide range of businesses, in a wide range of roles. I’ve led the creation of products that have generated cumulative revenue of over $1B. I’m sharing my background to provide context for the ideas I’m going to talk about.
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C O N T E N T
ADVISORYCONTROVERSIAL IDEAS
If anyone is uncomfortable hearing controversial ideas, now would be a good time to leave the room. :) In this session, I’m going to say some things that call into question some current best practices in Product Management.
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Credit: Eric Ries
Quick summary of Lean approach.
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IDEAS
BUILD
PRODUCT
MEASURE
DATA
LEARN
Credit: Eric Ries
Quick summary of Lean approach.
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Start with your ideaBuild Minimum Viable Product (MVP)
Iterate to validate your ideaFail faster
Core principles of Lean that may not always lead to the best results. I’ll explain why.
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Local MaximumInitial Idea
Success
Start with your idea?
Iterating to improve your initial idea may lead to a local maximum that’s insufficient to reach the product-market fit required for market success. Your initial idea is likely to constrain your future iterations unnecessarily.
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CuteFriendlySoft FurFetchPotty Trained
$20
Do you like my puppy? Most market research will indicate that iterating to add all these features will make an even better puppy. But it won’t help me sell my puppy to people who don’t want a dog, or who don’t want a pet of any type.
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Start with your idea Build Minimum Viable Product (MVP)
Iterate to validate your idea Fail faster
Start with your idea Build Minimum Viable Product (MVP)
Iterate to validate your idea Fail faster
Starting with your idea or solution is often the wrong place to start.
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IDEAS
BUILD
PRODUCT
MEASURE
DATA
LEARN
This is the expensive part This is the important part
Eric Ries accurately states that learning is the important part of the Lean cycle. And that building is the most expensive part. So why start with the most expensive part?
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Why build before you measure?
Is there any other industry where you build before you measure? When does this ever make sense? Why do it when introducing a new product, the riskiest time of all?
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What if they had started with minimum?
Do all products benefit from the Minimum Viable Product approach? Are there some products that succeed precisely because they’re not minimal?
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Start with your idea Build Minimum Viable Product (MVP)
Iterate to validate your idea Fail faster
Start with your idea Build Minimum Viable Product (MVP)
Iterate to validate your idea Fail faster
Building before measuring seems wasteful at best.A Minimum Product may not be the right thing for the target market, and may not be Viable as a result.
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The first principle is that you must not fool yourself— and you are the easiest person to fool.
– Richard P. Feynman
As you iterate to make your idea better and better, you work hard to gather evidence that shows your idea is valid. This leads to confirmation bias. You see only confirming info, and ignore other data. You can’t “validate” an idea. If Lean were truly scientific, you’d work to disprove your hypothesis, not validate it.
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Start with your idea Build Minimum Viable Product (MVP)
Iterate to validate your idea Fail faster
Start with your idea Build Minimum Viable Product (MVP)
Iterate to validate your idea Fail faster
Validating your idea is the wrong goal. Confirmation bias leads to self-delusion. Iteration in advance of finding a market is wasteful.
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Chasm
Credit: Geoffrey Moore
Fail hereValidate here
Iterate fast here
If you validate your initial idea with Geoffrey Moore’s “innovators”, then iterate with “early adopters” to refine your idea, you’re primed to fall into the Chasm. The “early majority” has different values, and may want a different product entirely.
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>80% Fail
Prior to the Lean approach, over 80% of new products and new ventures failed. Lean companies can now “fail faster,” saving money via fast, cheap iterations. Yet even with Lean, the failure rate is now… still over 80%.
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Start with your idea Build Minimum Viable Product (MVP)
Iterate to validate your idea Fail faster
Start with your idea Build Minimum Viable Product (MVP)
Iterate to validate your idea Fail faster
Is the goal really to “fail faster”?If Lean is the answer, then why isn’t the success rate much higher?
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Simon Sinek suggests an alternative approach, that leads to some different implications for growing a business.
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“People don’t buy what you do; people buy why you do it.”
–Simon Sinekwhy
Simon Sinek suggests an alternative approach, that leads to some different implications for growing a business.
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WHATHOW
WHY
Lean starts with your idea — the “what” — and then works towards validating the idea, with the goal of eventually figuring out why someone might buy it. What if we took the opposite approach?
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What makes a product Disruptive, and not just a crazy idea nobody wants? Disruptive products appeal to different customer values. As a result, the Functionality required to satisfy those values changes. Examples: Landlines->Cellphones. Film Cameras->Digital Cameras. Point & Shoot Cameras, MP3 Players->Smartphones. Retail->Amazon.com. Hotels->AirBNB. Taxis->Uber. In all cases, the definition of what is valued changes.
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Func
tiona
lityTime
Market Need
Sustaining Innovation
Disruptive Innovation
What makes a product Disruptive, and not just a crazy idea nobody wants? Disruptive products appeal to different customer values. As a result, the Functionality required to satisfy those values changes. Examples: Landlines->Cellphones. Film Cameras->Digital Cameras. Point & Shoot Cameras, MP3 Players->Smartphones. Retail->Amazon.com. Hotels->AirBNB. Taxis->Uber. In all cases, the definition of what is valued changes.
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Customer Values
Introducing Customer Values as what’s most important.
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By values, I don’t mean the kind that appear on corporate mission statements.
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Values motivations
goals concerns emotions
what people care about the “why” that makes them buy
Values is a catch-all term, used to describe the “why” that makes people buy. They can be positive: motivations and goals. Or negative: concerns or worries. They may relate to the product category, but they are not feature preferences.
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PRODUCT
VALUES
FEATURES
BENEFITS
Products have features. Features have benefits. Benefits appeal to specific values. Conversely:Customers have values, which lead them to seek specific benefits. Those benefits come from features, that are in a particular product. Customer values are fundamental.
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NO Optical Drive NO Ethernet Port NO Media Card Slot NO replacable battery Single USB Slowest
In 2008, if a market researcher asked you if you wanted a laptop that lacked all these standard features, would you want it? What if it cost 80% more than a standard laptop? Who would buy such a thing?
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80%In 2008, if a market researcher asked you if you wanted a laptop that lacked all these standard features, would you want it? What if it cost 80% more than a standard laptop? Who would buy such a thing?
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Lots of people would buy it. The Macbook Air lacked all of these features, cost 80% more, and became the best-selling laptop of all time. Why? It appealed to customers with a different set of values: lightweight portability and long battery life, more than MHz and MB.
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Values are fundamental
ideasproduct or servicemarket or segment
positioning and message
Why Values?
Values are discoverable and measurable
Why are customer values important? You can change your idea, product, market, or messaging. Values are more fundamental.Values are measurable and actionable. Values can be emotionally triggered. Values determine a customer’s reaction to your idea.
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x
Affordable
x
Fuel Efficient
x
Nostalgic
x
Modern Technology
Example #1: VW Beetle appeals to a different set of values than an Audi R8. Both might have started from the same Minimum Viable Product, but they satisfy totally separate market segments.
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x
Affordable
x
Fuel Efficient
x
Nostalgic
x
Modern Technology
x
High Performance
x
Luxury
x
Superior Technology
x
Driving Experience
Example #1: VW Beetle appeals to a different set of values than an Audi R8. Both might have started from the same Minimum Viable Product, but they satisfy totally separate market segments.
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precisely what you need in places you want to go
for business or playbest available rate guarantee
comfortably familiar roomsfree Wi-Fi
convenient diningalways included
Example #2: Delta hotels appeal to people who value a consistent experience wherever they go. AirBNB appeals to those seeking a different experience, but still want the safety of a more traditional hotel. By addressing customer values/concerns, AirBNB defined a new market.
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precisely what you need in places you want to go
for business or playbest available rate guarantee
comfortably familiar roomsfree Wi-Fi
convenient diningalways included
explore the worlddiscover local experiences
sense of belongingcommunity and connections
sharingmore affordable
trust & safetysupport neighborhood businesses
increase local tax revenue
unique accommodations
Example #2: Delta hotels appeal to people who value a consistent experience wherever they go. AirBNB appeals to those seeking a different experience, but still want the safety of a more traditional hotel. By addressing customer values/concerns, AirBNB defined a new market.
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Market SegmentGeographic
Demographic Behavioural
Psychographic Occasional By Benefits
Cultural
Traditional definitions of Market Segment appear to be proxies for what I think may be a better definition: Customers who share the same set of strongly held values about a type of product or service.
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Market SegmentShares the same set of strongly held values
about a product or service
Traditional definitions of Market Segment appear to be proxies for what I think may be a better definition: Customers who share the same set of strongly held values about a type of product or service.
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Maximum Value PropositionThe New
The “why” that makes them buy
The Maximum Value Proposition is the set of customer values that most strongly drives the buying decisions for your target market. It’s the “why” that makes them buy.
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Maximum Value Proposition
When your product is a clear expression of a set of customer values, your messaging clearly conveys these same values, and these same values are strongly held by your target market, then you have product-market fit.
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PRODUCT MARKET
MESSAGE
PRODUCT -MARKET
FIT
Maximum Value Proposition
When your product is a clear expression of a set of customer values, your messaging clearly conveys these same values, and these same values are strongly held by your target market, then you have product-market fit.
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PRODUCT MARKET
MESSAGE
PRODUCT -MARKET
FIT
Maximum Value Proposition
“Product-market fit is the only thing that matters.”–Marc Andreessen
When your product is a clear expression of a set of customer values, your messaging clearly conveys these same values, and these same values are strongly held by your target market, then you have product-market fit.
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Validating the Minimum Viable Product
Starts with your ideaProblem hypothesis testingSolution hypothesis testingGoal is to validate your ideaBuild minimal viable product
Contrasting the Minimum Viable Product with the Maximum Value Proposition.
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Validating the Minimum Viable Product
Starts with your ideaProblem hypothesis testingSolution hypothesis testingGoal is to validate your ideaBuild minimal viable product
Discovering the Maximum Value Proposition
Starts with the customerValue discovery
Value measurementGoal is to gain empathyDiscover maximum value
Contrasting the Minimum Viable Product with the Maximum Value Proposition.
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Value Discovery
Problem Discovery
is not
Problem Hypothesis TestingSolution Hypothesis Testing
Clarifying what Value Discovery is not.
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IDEAS
BUILD
PRODUCT
MEASURE
DATA
LEARN
The Lean cycle still has plenty to offer. It’s just starting in the wrong place. It’s not about your idea. It’s about your customers, and what they value. Start by measuring their values.
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IDEAS
BUILD
PRODUCT
MEASURE
DATA
LEARN
Start here
The Lean cycle still has plenty to offer. It’s just starting in the wrong place. It’s not about your idea. It’s about your customers, and what they value. Start by measuring their values.
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Credit: Strategyzer
Value Proposition Design provides a good framework for understanding and “validating” a value proposition. But like the Lean method itself, it starts with the product, rather than with the customer. I suggest starting with the customer will yield far better results.
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Gain Creator
Pain Reliever
Product Service
Job To Be Done
Gains
Pains
Credit: Strategyzer
Value Proposition Design provides a good framework for understanding and “validating” a value proposition. But like the Lean method itself, it starts with the product, rather than with the customer. I suggest starting with the customer will yield far better results.
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Gain Creator
Pain Reliever
Product Service
Job To Be Done
Gains
Pains
x
xCredit: Strategyzer
Value Proposition Design provides a good framework for understanding and “validating” a value proposition. But like the Lean method itself, it starts with the product, rather than with the customer. I suggest starting with the customer will yield far better results.
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Value Discovery Research
To best understand customer values, you can’t just ask people to tell you their values — you’ll get misinformation at best. So I’ve developed a method to identify and quantify customer values, called Value Discovery. Here’s a quick summary of how it works.
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Value Discovery ResearchQuick, cost-effective, fun
Small sample sizeQualitative and quantitative
Start high levelDrill down on top values Avoid focus on features
Learn, don’t proveNo sales
Seek empathy
To best understand customer values, you can’t just ask people to tell you their values — you’ll get misinformation at best. So I’ve developed a method to identify and quantify customer values, called Value Discovery. Here’s a quick summary of how it works.
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Why Empathy?
do more than solve problems
create products that intimately connect with your customers’ identity
Why is empathy so important? Why is empathy the goal of Value Discovery research?
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Market Problems
Win/Loss Analysis
Distinctive CompetenceCompetitive Landscape
Technology Assessment
Market DefinitionDistribution Strategy
Product Portfolio
Product Roadmap
Business PlanPricing
Build vs Buy
PartnersProfitability
Innovation
Positioning
Buying Process
Buyer Personas
User Personas
Requirements
User Scenarios
Status Dashboard
Marketing Plan
User EngagementUser RetentionProgram Effectiveness
Launch Strategy
Leadership
Lead Generation
ReferralsReferences
Sales Process
Collateral
Sales Tools
Channel Training
Presentations
Demos
Calls
EventsSupport
Staffing
OVERLOAD
At this point, you’re probably thinking: Oh great, on top of everything else a product manager has to do, here’s another chunk of work. You’ve already got a lot on your plate. Who needs yet another research project?
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Fortunately, the Maximum Value Proposition simplifies things. You can do less, and achieve more, if you start by understanding customer values. And you can apply this knowledge to all aspects of product management. Here are some examples.
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Maximum Value Propositionfor
New product creationProduct positioning
BrandingRoad mapping
Market segmentationProduct line extensions
Pricing
Fortunately, the Maximum Value Proposition simplifies things. You can do less, and achieve more, if you start by understanding customer values. And you can apply this knowledge to all aspects of product management. Here are some examples.
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Case Studies
Real Estate Financial Services English Language Centers
#1: Real EstateStartup. Focus was on Product Definition. MarketFit provided the training - they did the research. 2 weeks.#2: Multi-Campus International English Language CollegeFocus was on Pricing. MarketFit did the research. 3 weeks.
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Real Estate Financial Services
Long lists of detailed requirements Wireframes for MVP
Before Value Discovery
Workflow: Document management Unified view of all documents
Prospect interest, but no commitment Seeking contractor to build MVP
For this startup, Value Discovery identified what customers cared most about. This changed the product focus, reduced the requirements, and simplified the user experience. This insight helped gain nearly $1M in customer commitments, and the funding to go to market.
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Real Estate Financial Services
Long lists of detailed requirements Wireframes for MVP
Before Value Discovery After Value Discovery
Workflow: Document management Unified view of all documents
Prospect interest, but no commitment Seeking contractor to build MVP
Fewer requirements, simpler features Mockups illustrating “New MVP”
Dashboard: Deal management Different views for different roles
4 customer commitments $950k/year @ $50/transaction Investment to launch and grow
For this startup, Value Discovery identified what customers cared most about. This changed the product focus, reduced the requirements, and simplified the user experience. This insight helped gain nearly $1M in customer commitments, and the funding to go to market.
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Real Estate Financial Services
Long lists of detailed requirements Wireframes for MVP
Before Value Discovery After Value Discovery
“If you believe that you’re the subject matter expert, then you’re doing it wrong.”
Workflow: Document management Unified view of all documents
Prospect interest, but no commitment Seeking contractor to build MVP
Fewer requirements, simpler features Mockups illustrating “New MVP”
Dashboard: Deal management Different views for different roles
4 customer commitments $950k/year @ $50/transaction Investment to launch and grow
For this startup, Value Discovery identified what customers cared most about. This changed the product focus, reduced the requirements, and simplified the user experience. This insight helped gain nearly $1M in customer commitments, and the funding to go to market.
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0% 10% 20% 30% 40% 50% 60% 70% 80% 90% 100%
Location Price
Language Recommendation
Safety Easy access to visas
Accreditation of courses Support for international students
Lifestyle Students from same country are studying there
Employment prospects Admission requirements
Scholarship and financial aid Other
Links with local institutions Performance in ranking/league tables
Transfer of credits policy
Industry Market Surveys
Factors of Importance in Language School Choice
Language instruction is becoming a commodity, with little differentiation. Schools compete largely on price, driving margins down. Value Discovery identified the Maximum Value Proposition, providing differentiation that merits a price premium. Rollout with improved pricing, branding, positioning, and new services is about to begin.
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0% 10% 20% 30% 40% 50% 60% 70% 80% 90% 100%
Location Price
Language Recommendation
Safety Easy access to visas
Accreditation of courses Support for international students
Lifestyle Students from same country are studying there
Employment prospects Admission requirements
Scholarship and financial aid Other
Links with local institutions Performance in ranking/league tables
Transfer of credits policy
Value DiscoveryIndustry Market SurveysConfidence to communicate globallyEnhance career opportunitiesMake friends and gain experience
Factors of Importance in Language School Choice
Maximum Value Proposition
Price not a major factor
Learning English not the goal
Opportunities to connect after class Easy access to social activitiesFew students from my countryNo other country dominant
Language instruction is becoming a commodity, with little differentiation. Schools compete largely on price, driving margins down. Value Discovery identified the Maximum Value Proposition, providing differentiation that merits a price premium. Rollout with improved pricing, branding, positioning, and new services is about to begin.
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What if you knew what your customers valued most?
?Imagine how your business would change if you truly knew the “why” that made them buy.
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ThankYou
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Alan Albert
marketfit.com [email protected]
@A_Albert
© 2015 Alan Albert All rights reserved
Strategic Consulting for Measurable Growth
MARKETFIT