Where do you start when you build a product?

bb810ea3c1ce83c2b7168e62c21476c1.jpgPeople ask me this question in different contexts – from casual acquaintances who are not into business, those changing careers from engineering to product management, to someone in product marketing wanting to write a series of blog posts for marketing, to those who want to hire me to build and scale their business.  I share with them my simple, testable, repeatable model to build products.

I find there is no single unified coursework in MBA programs to cover this. I find the methods described in books on product management dive too quickly and too deeply into day in the life of a product manager. I find most enterprises and startups get into hustle of doing things first or attending many meetings about it than put some rigor around this most important aspect. I find the blog posts and advice from pundits are based on myths, fables and selective anecdotes.

I want to share with you my model or framework for great product management. I use this method with every new product, pivots or feature additions. I coach the teams I hire on this method to help them become amazing product managers.  Here I present an infographic of this framework I call, CAMP.

Ask me how I can help you, your business and  your team put this into practice to build products.  Remember, it is not a product until you have identified customers whose problems it solves and who are willing to pay for it.

Pm Framework

What are Twitter’s jobs-to-be-done?

This is a guest post by Hutch Carpenter. I met Hutch when he was running products for Spigit. He is one of rare product management leaders who starts with customers and their job to be done over myriad product features. Hutch now does Innovation Management Consulting for startups and enterprises. You can read his thoughts on innovation in his blog and follow his tweets at @bhc3. Hutch’s motto is, ” You can’t wait for customer insight. You have to go after with a club.”

Will your thoughts be featured next in this guest post series? Write yours now.


Jobs-to-be-done asks this: why did customers hire your product? “Hire” means they picked the product to satisfy some need or want. To think this way is to empathize with customers, better understanding growth opportunities. Two things to know:

  1. Jobs are relatively unchanging over time
  2. Products to fulfill jobs are not the same as the jobs themselves

Take Twitter: how’d anyone ever think *that* would be successful? Because it fulfills these jobs:

  • Learn new information
  • Share interesting stuff
  • Talk with others
  • Participate in major events
  • Connect with like minds
  • Establish professional reputation

We used to MySpace, email, write letters-to-the-editor, etc. Now we tweet.

Just Give Me A Reason

I think this mantra deserves many repetitions. It is simple yet works very well to help you communicate to your customers why you are increasing prices.

The real reasons why you should increase prices are many but I sure do hope those reasons start with your customers.

It could be because your initial price is wrong – you did not understand what your customers are paying for.

It could be because you see an opportunity to move them all to next higher version and shutdown your lowest priced version.

It could be because you want to change your customer mix and want to have more of those that value your product higher than most.

Ultimately all these reasons are rooted in profit motive. And that is good, I believe making profit is a noble pursuit.

But when you communicate your price increase to your customers make sure you give any reason but the aforementioned logical ones.

You must give a reason, any reason or reasons –

  1. Because our costs went up
  2. Because our landlord increased rents
  3. Because of foreign currency fluctuation
  4. Because of Obama Care
  5. Because of minimum wage increase
  6. Because of flood in Thailand
  7. Because my mom told me to
  8. Because our customers asked us to
  9. Because of menu alignment
  10. Because because (see here)

Just make sure these are not the real reasons you increase prices.

Giving reasons, regardless of how least realistic, relatable or  relevant they sound, helps defuse any backlash from customers from price increases.

Just give me a reason, just a little bit is enough.


Maximally Valued Product – How to find customer value perception?

The common definition of MVP is the Minimal Viable Product. The other MVP you should start thinking about – if you are serious about ringing the cash register – is Maximally Valued Product.  All that validated learning is useless if you cannot find whether customers are willing to pay for the value your product creates or if you cannot ring the cash register.

I introduced this new MVP in my last article.

A Maximally Valued Product for a given customer segment is the product version that adds most value to the customers while enabling marketer to extract their share of the value as price premium.

It is a very specific definition and it is customer centric. It does not leave the market wide open. It focuses on value created by filling a need (the need can be anywhere on this consumption spectrum). It closes with your share of the value created. After all charging for value created remains the simplest of all business models.

Here is a very easy way to remember MVP – Your $499 iPad that did not include ear-phones!

The next logical questions are

  1. How can we find the different segments?
  2. How can we find their different value perceptions?
  3. How can we map that value to a price they are willing to pay?

You business may be new. The technology may be most innovative. Likely nothing like your product existed before. But the methods to answer these questions are old –

  1. Find segmentation from cluster analysis
  2. Find value distribution with conjoint analysis
  3. Find price perception by adding price as component in conjoint analysis

See this brief introduction on how it is done in this Slideshare presentation –

But  but …

Who has access to these kinds of resources to do elaborate customer segmentation or complex analytics to find value and price perception. Especially startups.

Here is a teaser on a lean startup’s method for answering these questions. You will have to wait for the next article on how to analyze the results from this method.

Let me give you a very simple tool to answer two of these questions – segmentation and value perception. For finding pricing you can talk to me.

Think of your customer’s value perception as a resource allocation problem. Say you give your customers 100 coins. You present them an assortment of  benefits or a need fulfilled. Their job is to allocate those 100 coins such that they give more coins to the benefit they value more and vice versa.

Before you rush into this you need to know the following

  1. What are the key benefits do you want to measure vs. a long list of features? You find that  from initial customer discovery.
  2. Of those what can you deliver through your product and do it better than competition?
  3. How do you account for non-interest? That is how do you weed out those that are simply not interested in any of these benefits but did the coin allocation simply because you asked them to.

When you collect data from reasonably large sample (100-300) of target customers you will end up with a distribution of value perception. The data have the segmentation dimensions and the value perception of benefits.

Let me tell you more on how to analyze this distribution to find segments and value perception in my next article.

Do This Thing That Doesn’t Scale – Charge For Your Product

In his recent essay titled, Do Things That Don’t Scale, Paul Graham (who needs no introduction) urges startups to do things that don’t scale. In the context of customer targeting he writes,

Sometimes the right unscalable trick is to focus on a deliberately narrow market.

Take this specific advice and think of it in the context of monetization although that is not what Paul Graham had in mind or would approve.

In any market there exists a distribution of prices customers are willing to pay for a product. It ranges from $0 to some reasonably high positive number. If you set your price at $x then anyone who is willing to pay $x or more will buy your product and the rest wont. If you set the price to $0 you let the whole market in. That is indeed scale.

What if the deliberately narrow market you define is the segment that has a compelling problem to address and is willing to pay for an offering that fills that need? Sure it won’t scale because you need to

  1. Find the segment and precisely define its needs
  2. Find the economic value add to that segment from a solution that fills the need
  3. Find a way to target the customers in the segment as they do not stand up and identify themselves
  4. Understand how these customers make buying decisions and adapt your methods to make it easy for them to hire your product
  5. Explain to them why your product is the best option over other alternatives
  6. Prove to them the value from your product
  7. Finally do the most unscalable thing – ask them to pay for the value you created

Does charging for the value you create comes to mind when you think of things that don’t scale?

After all in the words of another startup founder,

 “It’s not a product until you define a set of customers whose needs you meet and who want to pay you.”




Strategy, Business Model, and Product

It has been a week of arguing which sequence is right. Is it

Product > Strategy > Business Model


Strategy > Business Model > Product

For most people in the valley – running startups, working for them or mentoring them to become insanely successful – the sequence is clear. There is no argument. Anyone who says otherwise simply doesn’t get it.

Wouldn’t it help if we all understand and speak the same thing when we say  Strategy, Product or Business Model?

Here is a very simple definition for these terms. Not made up, not changed to fit present day mania. These are well established definitions for running any business. And those disrupting status quo to create frictionless something or the other are not exempt from these definitions.

Strategy – Here is a simpler and relatable definition – Strategy is about making choices under constraints (and most times under uncertainty). Choosing the only option available to you (say going for 4th and 24 with 7 points down and 20 seconds on the clock) is not strategy. Choosing all options available because you are not resource constrained is not strategy. Strategy is making hard choice, under limited resources (there are only situations with limited resources) and the outcome is far from known.

For a VC firm their strategy could be the type of ventures they even want to consider, be it the pedigree or market it plans to play in. For accelerators it would appear they could fund anything and everything from enterprise to social media startups but their choice is to limit investment choices based on the stage of the startup.

For a startup (or more generally, a business) the choices start with which customer segment and need they want to target first – a segment with compelling unaddressed need, that is not only big enough but also had big growth opportunity. You can serve all customers and all needs. The old adage about being all things to all people goes well here.

For example, Salesforce.com choosing to serve enterprise customers with significant pain-points  (and IT budget to spend) and reach them through highly effective direct sales team vs. building out Chatter as competition for Facebook is their strategy. Another example is Netflix choosing streaming over DVD by mail as the future.

Strategy does not end with the first choice. If you have to make a hard choice among available options (and most times under uncertainty) then it is strategy. First it is the segment to target, then there are choices on routes to market, product, product features and when to deliver, pricing  and communication.

That is strategy.

Business Model –  You can do a Google search on all kinds of theoretical works on business model. In practical terms, business model is answering two questions

  1. How are you creating value to your customers? (see value equation)
  2. How are you capturing your fair share of that value created? (see Value Step function)

Together these two constitute your business model. You could be like some of the group buying sites and take a share of value you did not help create. Or you could be miss out getting your fair share. In either case your business will sooner or later will fail because it runs out of value to take or in latter case run out of cash.

You could introduce a third party (or fourth, or fifth) in the value flow – say advertisers, content producers – and decide to capture value indirectly. If your product adds compelling net new value to customers you chose to serve, charging for it remains the simplest of all business models.

And as an astute reader you noticed there are choices to make in defining the business model. It could be in how best to deliver value or how to capture value, whether to capture value upfront or align with value deliver (subscription). That is strategy does not go away when you move to business model.

Product – What is a product? Are your customers buying products? Ted Levitt said,

“Customers are not buying quarter inch drills but quarter inch holes”

Clayton Christensen said,

“customers have jobs to be done and they hire products for those jobs”

So we could say product is the value delivery medium. This is not to trivialize it. Product offers the greatest opportunity to innovate – to deliver something that does the ‘job’ better than any other alternatives available to customers, to deliver most natural way to use it, to do so in the most cost effective way for the venture that is building the product, to make it sticky, etc.

Again there are choices to make – what to build, when, how etc. More strategy in building the right product.

Given these, you decide whether one is greater than the other.  For startups, Fred Wilson argues finding the product-market fit first, deciding on strategy then business model.

For startups that begin as a personal problem the founder is trying to solve with the assumption that there are many others with the same problem it would appear

  1. start with the initial iteration
  2. keep refining it through user discovery
  3. build a large enough user base, getting early adopters to spread the word
  4. worry about monetization later

… is not only the only recipe but one that is guaranteed to deliver success (can you say Facebook, Twitter, Instagram, Pinterest?)

The argument for product first approach should not be because of what we know to be successful startups or because of one’s inability to start with strategy first.

Did you consider the possibility that when you do thousands of experiments – thousands of founders with the same personal problem, trying to address it in thousands of different ways – some experiments are going to succeed?