Lean

Product
Management

AchievingOptimalProductMarketFit
inRecordTimewithFewerResources

ByGregCohen
ForewordbyBrianLawley

280GroupPress

Copyright2011byGregCohen
Allrightsreserved.Nopatentliabilityisassumedwithrespecttotheuseoftheinformationcontainedherein.
Althougheveryprecautionhasbeentakeninthepreparationofthisbook,thepublisherandauthorassumeno
responsibilityforerrorsoromissions.Neitherisanyliabilityassumedfordamageresultingfromtheuseofthe
informationcontainedherein.
FirstEdition:September2011(v201205015AR)
eBookISBN:9781600052163
PlaceofPublication:SiliconValley,California,USA

Trademarks
Alltermsmentionedinthisbookthatareknowntobetrademarksorservicemarkshavebeenappropriately
capitalized.280GroupPresscannotattesttotheaccuracyofthisinformation.Useofaterminthisbookshould
notberegardedasaffectingthevalidityofanytrademarkorservicemarks.

WarningandDisclaimer
Everyefforthasbeenmadetomakethisbookascompleteandasaccurateaspossible,butnowarrantyoffitness
isimplied.Theinformationprovidedisonanasisbasis.Theauthorsandthepublishershallneitherliabilitynor
responsibilitytoanypersonorentitywithrespecttoanylossordamagesarisingfromtheinformationcontainedin
thisbook.

Contents
Foreword.............................................................................................................................................1
Preface................................................................................................................................................2
TheNeedforanAlternativeProductManagementFramework............................................................4
IntendedAudience.........................................................................................................................................4
SECTION1
INTRODUCTIONTOLEANPRODUCTMANAGEMENT............................................................................6
LeanProductManagementDefined.....................................................................................................6
TheRoleoftheLeanProductManager.........................................................................................................6
MathematicalDefinition................................................................................................................................7
Fit................................................................................................................................................................8
TheFoundationofLeanProductManagement...................................................................................11
TheTheorybehindLeanProductManagement..........................................................................................11
PrinciplesofLeanProductManagement............................................................................................16
SECTION2
THEPRODUCTMARKETFITCHALLENGE.............................................................................................19
Models..............................................................................................................................................19
UnderstandingtheProductMarketFitChallenge......................................................................................19
CaseStudies.................................................................................................................................................22
Optimizing(TypeI).......................................................................................................................................23
MarketDriven(TypeII)................................................................................................................................24
TechDriven(TypeIII)...................................................................................................................................26
Visionary(TypeIV).......................................................................................................................................28
MatchingtheDiscoveryandDevelopmentProcessestotheProductMarketFitChallenge................31
Problem,Product,andBusinessModelDefined.........................................................................................31

ii

ProblemUndefined......................................................................................................................................31
ProductSolutionUndefined........................................................................................................................32
BusinessModelUndefined..........................................................................................................................34
TwoorMoreVerticesUndefined................................................................................................................36
ValidatedLearning.......................................................................................................................................36
KeyProductDiscoveryandBusinessModelQuestions...............................................................................39
Project......................................................................................................................................................39
Problem....................................................................................................................................................39
Product.....................................................................................................................................................40
BusinessModel........................................................................................................................................42
PiecingItAllTogether..................................................................................................................................43
SECTION3
BECOMINGLEAN...............................................................................................................................44
Practices............................................................................................................................................44
SkillsandKnowledgeAreas................................................................................................................48
Measures...........................................................................................................................................49
PayOffandRisk.................................................................................................................................51
PortfolioPlanningandtheIdeationFunnel.................................................................................................52
Implicationstophasegate...........................................................................................................................53
Implicationsforprojectfunding..................................................................................................................54
LeaksversusLaunches.......................................................................................................................55
ProcessImprovement........................................................................................................................56
WhereDoServicesFit?......................................................................................................................56
Conclusion.........................................................................................................................................57
AdvancingtheDiscussion...................................................................................................................57

iii

Acknowledgements...........................................................................................................................58
AbouttheAuthor...............................................................................................................................59
About280Group...............................................................................................................................59
OtherBooksbythe280Group...........................................................................................................60

iv

Figures
Figure1:MathematicalexpressionofLeanProductManagement.............................................................7
Figure2:ThefivestepLeanThoughtProcess............................................................................................12
Figure3:Workinginsmallerbatchessignificantlyreducesdeliverytime.................................................13
Figure4:Bysequencingprojects,wecandelivervaluesoonerandcommitlater....................................14
Figure5:Totaldifferentiationisafunctionoftime...................................................................................16
Figure6:Thegoalistomaximizetheareaunderthecurve,whichrepresentsthedifferentiationofour
productovertime.......................................................................................................................................17
Figure7:Productmarketfittriad...............................................................................................................20
Figure8:ProblemProductSolutionMatrixillustratingthefourproductsolutiontypes..........................21
Figure9:Problem,product,andbusinessmodelcombinetoyieldeightdifferentproductmarketfit
challenges...................................................................................................................................................22
Figure10:Flipcreatedanewcamcordersegmentbyfocusingonunderservedneedsandcuttingback
onoverservedneeds..................................................................................................................................25
Figure11:GoogleAdwordsreportforvideowatchshowsanastoundingonemillionmonthlysearches
aswellashintsatsomeoftheintendeduses.Forreference,Rolexreceivesjustoverfourmillion.........33
Figure12:BusinessModelCanvas..............................................................................................................34
Figure13:Producingvalidatedlearningrequiresmanycyclestoconvergeonaviableproductmarketfit.
Italsorequiressomeresetswhenahypothesisturnsouttobefalse.Duringthosetimes,wecycle
counterclockwise........................................................................................................................................37
Figure14:AnsoffsProductGrowthMatrix.Thematrixisintermsofyourcompany.Thus,enteringa
newmarketmeansenteringanewmarketforthecompany.Themarketmaybeestablishedwithother
companiesservingitsneeds.......................................................................................................................41
Figure15:OlsenDesignMaturitymodeldefinesfourlevelsorganizationalcapability.............................44
Figure16:Exampleportfolioviewofcurrentprojectsbasedondifferentiation,levelofuncertainty,and
timehorizon................................................................................................................................................52
Figure17:Startupsthatmadeasignificantchangetotheiroriginalbusinessplansucceededmoreoften
thancompaniesthatstucktotheiroriginalbusinessplan.........................................................................53

Figure18:Traditionalserialproductlifecycleisorderedbyactivity.Incontrasttheconcurrentproduct
lifecycleneededforthemanyproductmarketfitchallengesinwhichtheproblem,solutionorbusiness
modelarenotfullydefinedisphasedbylearningobjectives....................................................................55

vi

Foreword
OverthepasttwentyyearsProductManagementhasmaturedandbecomerecognizedasaprofession.
Theneedforastrongproductmanagementfunction,processandstaffasacriticalcomponentfor
deliveringexcellentproductswithhighprofitabilityhasneverbeenmorefullyrecognizedor
acknowledgedthanitisnow.Greatcompaniesinvestinbuildinggreatproductmanagement,andthe
resultisthattheyreaptherewardsofcustomerloyaltyandprofitability.
Alongwiththechangesintermsofvisibilityandrecognitiontherehavealsobeenmanyadvancesin
ProductManagementmethodologyandresources.ProductManagementAssociations,ProductCamp
(Pcamp)conferences,books,bestpracticestemplates,frameworks,whitepapersandmanyother
resourceshavebeenbroughttolife.
The280GroupitselfhascontributedalargeamounttotheeffortsofmovingProductManagement
forward.Our280GroupPressseriesofbooks,OptimalProductProcessconsultingandtraining
offerings,newsletterandblog,ProductManagementLifeCycleToolkitandProductManagement
Officeandourvastarrayoffreeresourcesandwhitepapershavehelpedtensofthousandsof
companiestoimplementbetterproductmanagement.
TwentyfiveyearsagowhenIbeganmyproductmanagementcareernoneoftheseresourcesexisted.
Indeed,thingshavecomealongway.Butaswithanything,thereisalwaysaneedtopushtheenvelope
andseewhatcanbedonetobreakfreefromthepastandmoveforwardintoanexcitingandmore
fruitfulfuture.
Thuswepresenttoyouthisbook.ItisdesignedtochallengeyourthinkingabouthowProduct
Managementhasalwaysbeendone.Infact,itisdesignedtochallengethe280Groupsownthinking
aboutbestpracticesandthemethodologythatwetrainandhelpcompaniestoimplement.
Itispossiblethatthetheoriesputforthinthisbookwillhavelimitedapplicability.Itisalsoquitepossible
(andinmymindhighlylikely)thatformanycompaniesandteamsthereisaneedtodothingsvery
differentlythantheProductManagementhistoryandtraditionwouldallowfor.
Sopleaseenjoythisbook.Behighlycritical.Challengeourassumptions.Bevocal.Participate.Workwith
ustodiscovernewandbetterwaystogreatProductManagement.
Wewelcomeyourfeedbackandopinions!
BrianLawley
CEOandFounder,280Group

Preface
Thedotcomerawasanexcitingtimeforme.Ihadlefttherelativelystablewordofmedicaldevicesand
diagnosticsontheEastCoast,andheadedtoSiliconValleytojointheInternetboomasasoftware
productmanagerfortheecommerceplatformproviderPandesic.IntelandSAPhadprovidedgenerous
fundingforthecompanyandtheorganizationhadgrowntoover400people.Thecompanyhadplenty
ofcashandlotsofbrains,withmanyemployeescomingoutofIntel,Visa,andSAP.MyPandesic
colleaguesmightverywellhavebeenthemosttalentedgroupofindividualswithwhomIhaveever
worked.Butwehadaproblem:ourcustomerswerelearninghowtosellproductsthroughtheinternet
andourtraditionalproductdevelopmenttechniquescouldntkeeppacewiththeneedsofarapidly
changingmarket.
Inoneyear,IwasrecruitedoutofPandesictojoinanidealab!Incubatorcompany.AlthoughIdidnt
realizeitatthetime,thiswastobemymostprofoundexperienceinproductmanagement.Wehada
tinyteamwithnoformalbusinessplanjustachartertoseehowfarwecouldtakeanideathat
ideaLab!haddreamedupandshorttermmilestonestoensureweweremakingprogress.Weusedthe
LAMPopensourcestack(Linux,Apache,MySQL,andPHP).Ourdevelopmentteamneverexceeded
sevenmembers.Welaunchedtheproductwithintwomonths,whichwasunheardofinthosedays.At
firstweworkedonfiveweekreleasecycles,whichwesooncompressedtothreeweekswhenwe
adoptedXP(ExtremeProgramming.)
Westudiedhowusersbehavedonoursystem(youneedtorealizethiswas2001,andwehadverycrude
metricsatbest).Weziggedandzaggedwitheachnewpieceofinformation.Wewerenimble,andit
wasanamazingrushtoworkinthistypeofenvironment.Unfortunatelyforus,thedotcombubble
implodedandcapitaldriedup.Althoughwehadexceededallourcommitmentstotheboard,wewere
stillfarfromprofitability.Mostofourcustomersweredotcombusinesseswhowerealsostrugglingfor
survival,whichmeantourtimelinetobreakevenwasrapidlygrowinglonger.Beforelong,ideaLab!made
theonlyreasonablechoice,whichwastoshutusdownandfocustheirshrinkingresourcesonasmaller
setofprojectsthatwerelikelytoyieldquickresults.
AftermytimeatideaLab!Ineverlookedattheworldthesamewayagain.Itwasntuntilyearslater,
afterfurtherstudyofAgiledevelopment,Leanconcepts,andSteveBlanksFourStepstoEpiphany,
thatIfullygraspedwhyoursmallteamatideaLab!accomplishedsomuchinsuchashorttimewithso
fewresources.Inthisguide,Illrefertoconceptslikevalidatedlearning.AtideaLab!wecalledthat
throwitagainstthewalltoseeifitsticks.1Further,whenwechangedourbusinessplanasalogical
outcomeofwhatwelearnedthatday,wedidntcallitapivot.Itsjustwhatwediditdidnthavea

Onewaytotellifspaghettiisproperlycookedistothrowitagainstthewall.Ifitsticks,itisreadytoeat.Ifitfalls
off,itneedstocooklonger.

specificname.Fortunately,thereisnowalanguagetodescribethesetechniquesthatideaLab!
experimentedwithinthedaysofWeb1.0.TheybecamemorewidelyadoptedduringtheWeb2.0
boom,andarenowbeingpopularizedandfurtherdevelopedthroughtheLeanStartupmovement.The
codificationandevolutionofthesepracticesisamajorstepforward.
Theimplicationsofthislittlesliceofhistoryarenowclear.Thechoiceswehavewhenwebuildproduct
havechanged,andproductmanagersneedtounderstandthenewrulestoknowwhenitisbeneficial
andevennecessarytoapplynewmethods.Further,bestpracticesonlyexistatapointintime.
Productteamshaveandwillcontinuetoidentifybetterpractices,andproductmanagementasa
disciplinewillcontinuetoevolve.
Inthisguide,Iintendtolayoutanalternateframeworkforproductmanagement.Theframework
accommodatestheuncertainnatureofnewproductdevelopment,thedifferentcontextsinnew
productdevelopment,andcontinuallyimprovingthepracticeofproductmanagement.
IhopeyouenjoyreadingthisguideasmuchIenjoyedwritingit.

TheNeedforanAlternativeProductManagementFramework
Theproductmanagersroleisnowrecognizedascriticalwithintechnologycompanies.Yetwestill
practiceourtradeasacraftratherthanasamanagementscience.Further,theprofessionhasbeen
slowtoleverageandunderstandthefullimpactofchangesinprocessandtechnologiesthatcan
radicallyimprovethespeedandeffectivenesswithwhichwecan
createproductsthatcustomerslove,andwhicharedifferentiated
fromthecompetitivealternatives.Ascompetitivepressuresand
therateoftechnologicalincrease,effectiveproductmanagement
Wegetbrilliantresultsfrom
averagepeoplemanaging
becomesanecessity.Themarginsbetweenproductsuccessand
brilliantsystems.Ourcompetitors
failurecontinuetonarrow.
getaverageresultsfrombrilliant
peopleworkingaroundbroken
ThisguideseekstoexamineLeanprinciplesandhowtheyapply
systems.
tothefieldofproductmanagement.Furthermore,itseeksto

provideaframeworkforcontinuousimprovementandself
FujioCho,Toyotachairman
reflection,sothatproductmanagementasadisciplinecanmove
fromcraftsmanshiptomanagementscienceaprocessthatcan
providecompanieswithsustainedcompetitiveadvantage.

IntendedAudience
Althoughtheprinciplesinthisguideareuniversal,itiswrittenfortechnologycompaniesandindividuals
leadingproductmanagementteamsandorganizations.Muchofthediscussioncentersonsoftware
development,withafurtherfocusonhostedproductsthathaveuserinterfaces.Softwareespecially
hostedwebservicesoffersaflexiblemediuminwhichtowork.Therearethreecharacteristicsof
hostedsoftwarethatareparticularlyattractivetoproductmanagers:

Updatesrequireminimalcostandtimetodeployintothemarketplace.Becausethetransaction
costfortheupdatingissolow,itisfeasibletomakefrequentimprovementstotheproduct.
Theproductcanbeinstrumentedtoprovidearichsetofanalyticdata,whichgivestheproduct
managergreatinsightintohowtheproductisbeingused,whatfeaturesarebeingused,andthe
frequencyofuse.Thisusagedatacanbecapturedquickly,continually,andatlowcost.

Designanddevelopment(i.e.manufacturing)largelyhappenintandem,whichallowsdesign
decisionstobelockeddownlateinthedevelopmentcycle.Manydesigndecisionscanbechanged
withminimalcost.Thisisdifferentfromamanufacturedgoodwherethedesignmustbefinalized
tocreatethetooling,2andchangescanbeexpensive.Ofcourse,3Dprintingmaylessenthis
constraint.

Sotheapplicationofthemethodsdiscussedwillneedtobeadjustedtoaddresstheindividual
constraintsofthecompanyculture(whichmayitselfneedtochange),theproductmediumandthe
marketenvironment.Specifically,someadjustmentisrecommendedforphysicalgoods,clientinstalled
software,missioncriticalproducts,orregulatedproductstoaccommodatetheincreasedtimeandcost
ofeachiterationinthelearningcycle.
Lastly,thisguideisintendedtochallengeconventionalthinking:asalways,applycommonsense.

Japaneseautomakershavedevelopedsomeworkaroundsforthisconstraint.Theyroughcutdiesforstamping
bodypartsearlyintheprocess,asthedesignisevolvingandleaveexcessmaterialwheretheybelievechanges
mightstilloccur.Thefinaldesignisnotlockeddownuntillateintheprocess,leadingtobetterdiedesigns,and
fastertimetomarket.(source:MaryandTomPoppendieck,LeanSoftwareDevelopment:AnAgileToolkit,Boston:
AddisonWesley,2003)p.48.

IntroductiontoLeanProduct
Management
LeanProductManagementDefined
Thesubtitleofthisguideis:

Achievingoptimalproductmarketfitinrecordtimewithfewerresources
AlthoughthatcapturestheessenceofLeanProductManagementit'sbetter,faster,andcheaper.Ifwe
wantedtobeevenmoreprecise,wecouldexpanditalittle:

Achievingeverbetterproductmarketfitineverlesstimewitheverfewerresources3
Althoughthisseconddefinitionislesssnappy,itmakesthepointthatLeanProductManagementisa
journey.Itisaprocessofcontinuouslearningandimprovement.Thereisnopointatwhichwecansay,
Wehavearrived.Wecanonlysay,Wedidbettertodaythanyesterday,andIbelievewiththe
followingchangeswecandoevenbettertomorrow.

TheRoleoftheLeanProductManager
ProductManagersbridgetheproblemandsolutionspaces.Intheproblemspace,theproductmanager
workstouncovercustomerproblems,identifythosethatthecustomeriswillingtopaytosolve,and
thenconfirmsthatthereareenoughcustomerswhosharetheproblemtoconstituteamarket.
Inthesolutionspace,theproductmanagerworkswithdesigners,userexperienceexperts,and
engineerstoexplorepossiblesolutionstotheproblem.Thegoalistofindasolutionthatistechnically
feasibleandcanbe:

Producedatacostwellbelowthepricethecustomeriswillingtopay
Deliveredandservicedthroughadistributionchannelthatcanreachthetargetmarketcost
effectively
Differentiatedfromthecompetitivealternatives

JamesP.Womack,authorofLeanThinkingdefinesLeanasCreatingevermorevalueforcustomerswithever
fewerresources.DanOlsenadaptedthedefinitiontoproductmanagementinhisSiliconValleyPcamp2011talk
LeanProductManagement(http://www.slideshare.net/dan_o)asAchievingProductMarketFitquicklyina
resourceefficientmannerwhichbettercapturesLeanfromtheproductmanagementperspective.

Thus,thefasterandmorecosteffectivelytheproductmanager,workingwiththeproductteam,can
achieveproductmarketfit,thebettertheabsoluteandriskadjustedreturnontheproductfortwo
reasons:
1. Abetterfitleadstoamoreappealingproductforthetargetmarket
2. Afasterfitmeanstheproductwillenjoymaximumdifferentiationforalongerperiodoftime.
Asproductmanagerslearnnewwaystoachieveproductmarketfitfasterandwithfewerresources,
theybecomemoreeffective,theirproductsmoresuccessful,andtheircompaniesmoreprofitable.A
greatproductmanagercancreateasuccessfulproduct,andagreatproductmanagementprocesscan
leadtosustainable,longtermcompetitiveadvantageforthecompany.

MathematicalDefinition
LeanProductManagementcanbeexpressedinasimpleyetpowerfulformula(Figure17):

Figure1:MathematicalexpressionofLeanProductManagement

Thegoalistoperformactivitiesthatwillincreaseproductmarketfit,decreaseourtimetomarket,and
decreaseourcosts.Thefirsthalfoftheequationdealswithrevenueandthesecondhalfwithcost.The
expressionisaproxyforProfit=RevenueCost.Ateamstartswithagivenstructure,processand
capability,sotheformulafocusesonchanges(ordeltas)thatmightbeimplemented.Althoughitwould
beimpossibletoaccuratelyquantifyeverydecision,theformulacanbeusedtoguidedecisions.For
example:
1. Byansweringaresearchquestion,theproductwillhavegreaterdifferentiationinthemarket,
leadingtoahigherpricepointandincreasedsales.Iftheincrementalprofitfromthebetterfitis
greaterthanthecostoftheresearch,thentheactivityshouldbeperformed.
2. Iftimetomarketcanbedecreasedby30dayswiththehelpofanoutsidevendor,andtheprofit
duringthose30daysisgreaterthanthecoststoacceleratetheproject,itisworthwhile.
3. However,iftimetomarketisreducedbyskippingimportantconcepttestingthatwillultimately
decreasefit,thenthisisabadtradeoffandwillmaketheproductlessprofitable.Thisisknown
astherushtofailure.4

JimReekes,SeniorConsultantandTraineratthe280Group,introducedmetothistermwhichperfectlycaptures

Ideally,theimprovementcycleisreinforcing,improvingtwoorallthreevariablestogether.For
example,decreasingtimetomarketbyincreasingcollaborationbetweengroupsproducesrevenue
soonerandreducescosts,becausetheproductteamssalariesarenowgoingtowardsthenextproject
ofvalue.
Lastly,itisimportanttooptimizethewholesystemandnotjustalocalfunction.Forthisreason,the
formulalooksattimetomarketandnotthetimetakenforindividualsteps.Forexample,iftheproduct
managerpushesuserstoriestodevelopmentwithoutgoodsatisfactioncriteria,hemayhavesaved
himselftime,butthestorieswillrequireadditionaliterationstoachieveacceptablefit,lengtheningthe
overalltimetomarketandtomarketfit.
Interestingly,afterversiononeisreleased,acompanymaydeliberatelywanttopacetheintroductionof
thenextversioneithertomaximizeprofitsontheproductorbecausethemarketcannotabsorb
releasesatafasterpace.Inthissituation,youshouldfixtimetomarketbasedontheidealrelease
cycleandfocustheproductteamseffortsonimprovingfitanddecreasingcostduringtheallocated
time.

Fit
Achievingandmaintainingfitisanincrementalprocess,andthereforeneedstobetestedrepeatedly
fromconceptdevelopmentthroughlimitedavailabilityandpostlaunchstages.Thistestingoccurs
throughamixofqualitativeandquantitativemethods.
CONCEPTDEVELOPMENTFIT
Duringconceptdevelopment,fitisusuallymeasuredqualitativelythoughinterviewsandfocusgroups.
Ifthepersonbeinginterviewedorshowntheconceptgoesoutoftheirwaytoasktobenotifiedwhen
theproductbecomesavailable,thatsagoodsign.Ifyouaskthemiftheydliketoknowwhenthe
productbecomesavailable,assumetheyarejustbeingpolitewheniftheyansweryes.Iftheyindicate
theyliketheidea,itisfair.Iftheyindicatetheyloveit,theyprobablyonlylikeit.5Whatdoescomeout
oftheseconcepttestinterviewsarethebenefitandfeatureareasthatcustomerslike,areindifferentto,
dislike,orhaveconcernsabout.Thisresearchnotonlyhelpsguidetheproductprioritiesbutalsothe
messaging.

howproductteamscanrunoffatfullspeedtocreateasolutionbeforetheyeventrulyunderstandtheproblem
thatneedssolving.
5
Remembertoalsomakeallowanceforculturaldifferences.Verybroadly,individualsfromculturesthatdeprecate
personaldemonstrativeness(e.g.,theUK,Germany)mightbemoremutedintheirresponsethanindividualsfrom
thosethatplaceahighervalueonpositiveattitudes(e.g.,theUS).

Thereareadvancedmethods,suchasproblemdetectionstudies,thatcanhelprankproblemstobe
solved.Kanosurveyscanprovideinsightintowhichproductproblemswouldifsolvedcreate
excitementfromusersand,conversely,wouldcreatedissatisfactionifnotsolved.Adaptiveconjoint
analysisallowscompaniestotestdifferentconfigurationsandpricestounderstandrelativetradeoffs
userswillmake.Theseadvancedmethods:

Areexpensive.
Assumetheuserisfamiliarwiththeproductcategory(notgoodforvisionaryproducts).
Assumeyourimplementationofthesolutionwillmeettheusersexpectation.

Intheconceptstage,measurementisoftenbasedaroundtryingtobedirectionallycorrect.Further,
thereisincreasedriskbecausethemeasurementassumestheimplementationwillmeetthecustomers
expectationofthesolution.
LIMITEDAVAILABILITYANDPOSTLAUNCHFIT
Oncetheproductisinthemarket,therearemetricsthatcanbetrackedtofurtherassessfit,and
whetherfitisimprovingordiminishingwithtime.Withonlineproducts,youhaveanadvantage:you
canmonitorfitorkeyperformanceindicators(KPIs)offitwithmetricssuchasconversation,
engagementandretentionrates.Ifyoucanttrackthese,youneedtofindasimilarproxythatyou
believecorrelatestocustomersatisfactionwithyourproduct.TwometricsthatcanassistareNet

PromoterScore ,whichhasbeenaroundforanumberofyears,andSurvey.io,whichisnewerand
gainingpopularityinthestartupcommunity.
NetPromoterScore
NetPromoterScore(NPS)usesasinglequestiontodivideusersintooneofthreecategories.Thesurvey
questionasks,onazerototenscale,howlikelyareyoutorecommend[companyname]toacolleague
orfriend?

Promoters(910)highlysatisfiedandloyalcustomerswhoaremostlikelytoevangelizeyour
productandcontinuetopurchaseproductsfromyourcompany.
Passives(78)satisfiedbutonlymoderatelylikelytorefercolleagues,andnotloyaltoyour
companyorproducts.
Detractors(06)unhappycustomerswhoareleastlikelytorefercolleaguesandrepurchase
fromyourcompanyandmayactuallyprovidenegativereferencesandbadwordofmouth.

NetPromoterScoreandNPSaretrademarksofSatmetrixSystems,Inc.,Bain&Company,Inc.,andFred
Reichheld.

AcompanysNetPromoterScoreisthepercentageofpromotersminusthepercentageofdetractors.6
ApositiveNPSisconsideredgoodandgreaterthan50%isconsideredexcellent.7NPSwillvaryby
category,soitisimportanttobenchmarkyourcompanyagainstcompetitorsforacompletepicture.
NPSusuallyaddressescompanyloyalty.Ifyourcompanysellsmorethanoneproductyouwillwantto
segmentyourdatabythesolutionthesurveyrecipientsareusingthequestioncanalsobephrasedto
askaboutthespecificproductratherthanthecompany.Youshouldalsoconsiderthesignificanceof
whereintheprocessyouarerecordingthemeasure(suchasafterpurchase,atechnicalsupportcall,
etc.)
Survey.io
SeanEllisofSurvey.iodevelopedasimple,productfocusedquestiontoassiststartupsinmeasuringfit.
Usersareasked:
Howwouldyoufeelifyoucouldnolongeruse[productname]?
1.
2.
3.
4.

Verydisappointed
Somewhatdisappointed
Notdisappointed(itisntreallythatuseful)
N/AInolongeruse[product]

If40%ormoreanswerverydisappointedthenyouhaveachievedgoodfit.Iflessthan40%youneed
toenthusetheapatheticusersandconductfurtherresearchtounderstandwhatwillberequiredor
whatitisaboutyourproductorbusinessmodelneedstofundamentallybechanged.8
NeitherNPS,Survey.ionorotherKPIscoresguaranteethatyourproductwillbesuccessful.Many
elementscontributetoaproductssuccessbeyondfit.Further,thesemethodshavetheirlimitsand,
usually,theirdetractors.9Butthebenefitsarethattheyarerealtimeindicators,canbecollectedby
askingusersasinglequestionortrackingasinglenumber,anddonotrequireaprofessionalresearch
firmtoanalyze.Plus,theresultsareeasytounderstandandexplain.
Beta
Itisnotalwaysdesirabletoreleasetheproducttothepublic.Inthissituation,inviteonlybetatests
allowforrealfeedback.Thefeedbackwillbelessvariedthanabroaderreleasebutengagementshould
behigherwiththebetatesters.Discussions,measurements,andsurveyscanbeusedtomeasurefit.

TheOneNumberYouNeedtoGrow,HarvardBusinessReview,December2003.
http://en.wikipedia.org/wiki/Net_promoter_score
8
http://startupmarketing.com/usingsurveyio/
9
LifeAfterNPS:ControversystillsurroundstheuseofNetPromoterScore,AMAMarketResearch,Summer2011
7

10

Betatestersagreeingtoprovidereferencesandparticipateincasestudiesareanindicatorthatfithas
beenachieved.

TheFoundationofLeanProductManagement
LeanProductManagementisbasedonandadaptedfromLeantheoryandtheTheoryofConstraints
(TOC)withagooddoseofbusiness,product,andmarketstrategytheorymixedin.Itcomprisesasetof
principlestoguideaction,aprocessframeworkthatsetscontextanddefinesthepathtomost
effectivelyachieveproductmarketfit,andasetofpracticesthatmaptotheprinciples.Leanproduct
managersalsorequirenewskillstraditionallynotrequiredbyproductmanagementand,lastly,new
measurestofacilitatelearningandimprovement.

TheTheorybehindLeanProductManagement
Leantheoryhasevolvedoverhalfacenturyandconstitutesasignificantbodyofknowledge.Leanwas
firstpracticedinmanufacturing,withToyotabeingathoughtleaderandtheToyotaProductionSystem
beingamodelimplementation.Thetheory,however,hassuccessfullybeenappliedtohealthcare,
services,administration,softwaredevelopmentandnewproductdevelopment.Thissectionwillonly
coverathinsliceofLeantheory.Itisintendedtoonlyprovideenoughofafoundationtosupplythe
minimumcontextfortherestofthediscussion.ReaderswithastrongbackgroundinAgiledevelopment
willseemanysimilaritiesintheunderlyingpractices.AgilesharesmanyofLeansvalues,suchas
empoweredteams,continuousimprovement,visualcontrolsandarespectforpeople.Leanisalso
multifaceted.Itisaculture,adisciplinedapproachtoproblemsolving,andasystemfordoingwork.
Theculturalaspectsareparticularlyimportantforasuccessfulimplementation.Topmanagementmust
embracetheprinciples,andemployeesmustdevelopnewpatternsforworkingtogether.Culture,
however,isatopicuntoitselfandbeyondthescopeofthisguide.Thebriefdiscussioninthissection
focusesonthesystemsview.
TheLeanEnterpriseInstitutedescribesLeanasfivestepthoughtprocess.10
1. IdentifyCustomerValuedefinevaluefromtheperspectiveofthecustomer.
2. MaptheValueStreamidentifyallstepsinthevaluecreationprocessandremovethosesteps
thatdonotcreatevalue.Valuestreamanalysisfocusesontheflowofmaterialandinformation
throughthesystemwithafocusonthroughputandwaittimes.ThisisdifferentfromMichael
PortersValueChainAnalysis,whichlooksatprimaryactivities(suchasoperations,salesand
marketing,etc.)andaskshowmuchvalueeachactivitycreates.
3. CreateFlowassemblevaluecreatingstepsinatightsequencetoenablevaluetoflowquickly

10

http://www.lean.org/WhatsLean/Principles.cfm

11

throughthesystem.
4. EstablishPullAsvaluestartstoflow,valueispulledthroughthesystemideallybythe
customerandattherateofcustomerdemand(buildtoorderisapullsystem).Thiscontrasts
tomostsystems,whicharepush.Lookingatasoftwaredevelopmentexample,engineering
traditionallybeginsdevelopmentwhenproductmanagementpushesarequirementsdocument
tothedevelopmentteam.Inapullsystem,developmentsignalsthatcapacityhasbecome
availableandproductmanagementthenprovidesthenextmostimportantrequirementon
whichtowork.
5. SeekPerfectionwerepeatthepreviousfourstepsuntilwehaveremovedallwasteinthe
system.Perfectionisastatewecontinuetoapproachbutneveractuallyachieve.
Figure2illustratesthisloop.
WithinthislargercontextoftheLeanThoughtProcess,
therearefivecomplementarypractices,whichwillbe
definedinthediscussionfollowing,thatcanhelpguide
teamsinachievingperfectionandastatedescribedasfast,
flexibleflow:11
1.
2.
3.
4.
5.

MinimizeQueuesbyworkingin
SmallBatches,managedthrough
WorkinProgress(WIP)limits,to
Shortencycletimes,andapproach
Singlepieceflow

Queuesaretheenemyofresponsiveandflexiblesolution
development.Theyhurtcycletime,quality,andefficiency.
Thisexposesustochangesinpreference,competitorpreemption,unpredictableschedules(i.e.delays),
decreasedqualityduetolongfeedbackloops,andreducedrevenue.12

Figure2:ThefivestepLeanThoughtProcess

Queuesaremadeupoftwoelements:
i)

Thesizeofthebatchbeingpassedtothenextphaseandtheassociatedtimeitwilltaketo
process,plus

11

IwasintroducedtothetermFastFlexibleFlowinAlanShalloway,GuyBeaver,JamesR.Trott,LeanAgile
SoftwareDevelopment(Boston:AddisonWesley,2010)pp.1415.Thediscussionofthepracticestoachieve
fast,flexibleflowisheavilyinfluencedbyDonaldG.ReinertsensbookThePrinciplesofProductDevelopmentFlow:
SecondGenerationLeanProductDevelopment(RedondoBeach:CeleritasPublishing,2009).
12
Reinersten,pp.5658.

12

ii)

anywaittimebeforethebatchisworkedupon.Limitingbatchsize,therefore,isvery
important,becausequeuesizecanneverbelessthanbatchsize.Itcanbelongerifthebatch
hastowaitforanavailableresourcebeforeworkcanbegin,butnevershorter.

Ifwewanttoshrinkqueues,thenweneedtolearntoworkinsmallerbatches.Onetechniqueisto
deliverproductrequirement(i.e.howtofunctionallysolvethemarketproblem)incrementallyinthe
formofminimummarketablefeatures13(MMFs),userstories,orothergranularartifacts.Insome
contexts,themarketrequirements(i.e.themarketproblemtosolve)mayalsobeabletobedelivered
incrementally.

Figure3:Workinginsmallerbatchessignificantlyreducesdeliverytime

AfurtherwaytomanagequeuesandkeepbatchessmallistoenforceWIPlimits.Thus,welimitthe
workinprogressandmonitorqueuesateachstepintheprocess.Ifadownstreamprocessreachesits
WIPlimit,weanalyzethesituationtoseehowtofixitratherthancontinuingtogrowtheworkinqueue.
Forexample,ifabackupoccursatQA,theteammayshifttoassistQAuntilthebackupisclearedand
flowisrestoredtothesystem;iftheteamdoesnothavethecrossfunctionalskilltoassistanother
function,itwillpaceitsworktothethroughputofthebottleneck(withsomesafetybuffer).Overtime,
theteamwillfocusonelevatingthecapabilityofthebottlenecktoincreaseitsoverallthroughput.

13

Minimummarketablefeature(MMF)isdescribedbyMarkDenneandJaneClelandHuangintheirbookSoftware
byNumbers:LowRisk,HighReturnDevelopment(NewJersey:PrenticeHall,2003).TheauthorsdescribeanMMF
asafeaturethat"createsmarketvalueinoneormoreofthefollowingways:competitivedifferentiation,revenue
generation,costsaving,brandprojection,andenhancedloyalty."Theauthorsfurthergoontostatethat"eventhis
listisbynomeansexclusive,astruevaluecanonlybedefinedwithinthecontextoftheproposedprojectand
measuredbytheorganizationdevelopingthesoftware."

13

Thiscontraststothetraditionalapproachandthinkingthatviewsengineeringteamsasaprecious(i.e.
expensiveandscarce)resourcethatmustbekept100%utilizedwritingnewcode.Delayingtherelease
oftheproductbycreatingalargebacklogattestingdoesnotcreatevalueforourcustomersorour
companies.Ratheritmakesourteamsinflexibleandslowtodeliver.
Asbatchsizeshrinksandtheteamfocusesonfewerconcurrentitems,cycletimesdecrease.Iffeatures
andenhancementstakelesstimetogetthroughthesystem(figure3above),forexamplegoingfrom
monthstoaweek,thentrackingandstatusreportingaregreatlysimplified.Statusissimple:eitherthe
featureisinprogressoritisinqueue.Theteamcanevenproduceestimatesofwhenaniteminthe
queuewillbeworkedon,basedontheircapacityandthroughput.Lastly,asfeaturesaredeveloped
seriallybutquickly,productmanagementwillhaveconsiderablymoreopportunitytosolicitfeedback
fromcustomersandstakeholdersthroughoutthedevelopmentprocess.Asnewlearningemerges
and/oropportunitiesemerge,theplancanbeadjustedforanoptimaloutcome.Figure4below
illustrateshow.Inthisexample,anoptimaloutcomeisachievedbyserializingtheprojects:
1) Youcanplacethemostvaluableandtimesensitiveproject(projectA)firstandrealizerevenue
fromitscompletion4.5monthsearly
2) Leaveyouroptionsopenaboutthenextmostvaluableproject(ProjectB).Atthe4.5month
mark,youcannowdecideifBisstillthenextmostvaluableprojectonwhichtowork.

Figure4:Bysequencingprojects,wecandelivervaluesoonerandcommitlater

Thefinalelementoffast,flexibleflowisthegoalofsinglepieceflow.Inproductdevelopment,apiece
couldbeamarketrequirement,afeature,auserstory,etc.Thus,theteamworksononeitematatime,
onlyworksonthatitemwhenthereisprovendemand(ideallyactualorders),anddeliversitquickly.The
shorterthecycletime,themorepracticalsinglepieceflowbecomes.Newproductdevelopment,
however,isnotmanufacturing.Thetimebetweenstagesnaturallyvariesbecausetheworkisdifferent
eachtime,requiresnewknowledgecreation,andwillhaveunplannedchallenges.Itthusdoesnotmake
sensetolimitateamtosinglepieceflow.Abuffershouldexist.Butwecanappreciatetheidealized
stateofsinglepieceflowandsearchfortherightbalanceofWIPandCycleTimetooptimizetheflowof
valueanddesiredflexibilityofthesystem.

14

TheInfluenceofWIPandCycletime
Therelationshipbetweenthroughput,cycletime,andWIPcanbeexpressedas:

Thoseactivitiesthatdecreasecycletimeforagivenstepintheprocesswithoutincreasingcycletimeby
agreateramountelsewhereinthesystemwillhavetheneteffectofdecreasingtimetomarketforthe
project.SubstitutingTimetoMarketforCycleTimeproducestheformula:

Rearrangingtheformulaproduces:

TakingtheoriginalmathematicalexpressionforLeanProductManagement(figure1)andsubstituting
forTimetoMarketyieldsanequivalentexpressionthatletsusconsidertheeffectsofthroughputand
WIPandchangeswemaketothesystemmoredirectly:

15

PrinciplesofLeanProductManagement
PrinciplesarethefundamentalassumptionsbehindLeanProductManagement.Ifyoudisagreewiththe
principlesthenyouareunlikelytoagreewiththisframework.Likewise,ifyouagreewiththeprinciples
butdonotpracticethem,yourabilitytosucceedwiththeLeanProductManagementframeworkwillbe
limited.Further,theLeanProductManagementframeworkisaworkinprogressand,assuch,itis
anticipatedthatprincipleswillbeclarifiedfurther,newprincipleswillbeadded,andsomeexisting
principlesmayberetired.
1. Weareinbusinesstosatisfycustomers.Makingaprofitisaconstraintthatmustbemanaged,
becauseanunprofitablebusinessisnotviableandwillnotbearoundinthelongtermtosatisfy
customerneeds.Enjoyingaboveaveragemarginsandincreasingshareholdervalueisan
outcomeofdoinganexceptionaljobofsatisfyingourcustomers.
2. Thecustomerdefinesvalue,andtheyvoteinthemarketplaceeveryday,withtheirwallets,on
whichproductstheybelievewillsatisfytheirneedsbest.
3. FocusonDifferentiation14
a. Differentiationishowweseparateourproductsandservicesfromthealternatives.
b. Differentiationmustbeonanaxisofvaluethatmatterstothecustomer.
c. Differentiationisafunctionofthemagnitudeofoneproductsdifferencescomparedto
thealternatives,andthetimedurationinthemarketplacethatthedifferentiationis
maintained(asperceivedbycustomersandusers).Thus,totaldifferentiationequalsthe
integralofthedifferentiationasmaintainedovertime,wheret0representsgeneral
availabilityoftheproductandtxrepresentsthepointatwhichmeaningfulproduct
differentiationnolongerexists(FiguresFigure5andFigure6).

Figure5:Totaldifferentiationisafunctionoftime

14

Porterdescribesthreemajorstrategiestoachievecompetitiveadvantage:CostLeadership,Differentiation,and
Focus.Thisguideisforcompaniesthatcompeteondifferentiation.Differentiationalsoappliestofocusstrategies.
Ifyouareabletoachievesustainedcostleadership,youwillfinditalegitimateandsuperbstrategy,butisbeyond
thescopeofthediscussioninthisguide.

16

Figure6:Thegoalistomaximizetheareaunderthecurve,whichrepresentsthe
differentiationofourproductovertime

4.

5.
6.

7.

8.

d. Todifferentiate,wemustbeclearonourproductsorcompanysvalueproposition.
e. Wecandifferentiateonfunctionality,performance,service,and/orbusinessmodel.
ABV(alwaysbevalidating)followadiscoveryandvalidationpaththatforcesyou,theteam,
andthebusinessasawholetostateyourhypotheses.Alongthispath,createwaystotesteach
hypothesiswiththesmallestinvestmentpossible.Thisistermedvalidatedlearningandallows
ustotestourassumptionsaboutproductmarketfit.Performingthesetestsletsusreducerisk
toourprojects.Thisisparticularlycriticalwherehistoricdatadoesnotexistformaking
informeddecisions,but,regardless,isanactivitythatisperformedalongtheentireproduct
lifecycle,evenafterlaunch.Thistopicwillbeexpandedlaterinthisguide.
Shortenfeedbackcyclesshorterfeedbackcyclesallowustoidentifyproductmarketfitfaster
andforlesseffortthanlongerfeedbackcycles
Respectpeopleandtheteamproblemdiscoveryandproductdevelopmentisahuman
endeavorperformedbyknowledgeworkers.Respecttheseworkersandassumetheperson
doingtheworkknowsthemostaboutthework.Errorsaretheresultofpoorsystemdesignand
notthefailuresofindividuals.Inadditiontoworkingtoimproveourproducts,wemustalso
alwaysworktoimprovethesystem.Teamsmustbegiventhetimeandtoolstofocuson
improvingtheirworkpractices.
Maketheproductteamsworkvisiblewhentheteamandcompanycanseehowtheproject
isprogressingwithouthavingtoaskforstatus,youspendmoretimedevelopingnewlearning
ratherthanansweringquestions.Further,socializeyourplansandanynewknowledgethathas
causedyoutoalteryourplans.
Matchtheprocesstotheproblemunderstandthetypeofproductmarketfitchallenge
17

(describedinSection2ofthisguide)youaretryingtosolvesothatyoucanusethemost
effectiveapproaches.
9. Balancevaluewithriskandcostaswellasshorttermvs.longtermneedstherearenatural
tensionsthataffectourproducts.Wemustbeawareofthemandfocustobalancethem.This
helpsustooptimizetheoutcomebothforourcustomerandforourbusiness.
10. ReduceworkinthesystemreducequeuesandWIPtodeliverthemostvaluableworkfirst,
retainplanningflexibility,anddefercommitmentaslongasresponsible.Shiftyourfocustotime
(i.e.howlongittakesyoutocreateanincrementofvalueortestahypothesis)andawayfrom
costs.

18

TheProductMarketFit
Challenge
Models
Itistruetoapointthatproductmanagementmodelshavemostlybeencharacterizedbyonesize
fitsallapproaches.The280GroupOptimalProductProcess(OPP)representedamajorstepforward
allowingcompaniestheflexibilitytofittheirculture,specificteamdynamicsandtheneedtodocument
decisionsandproductstrategyattheappropriatelevel.Thisguidedoesnotlooktorefutethevalidityof
existingmodels,buttorecognizethattheydonotalwaysprovideadequateguidanceonhowtocreate
successfulproductsinavarietyofbusinesscontexts.LeanProductManagementseekstoilluminatethe
previouslydarkareaofmatchingtherightprocesstotheproductmanagementproblembeingsolved.
Byselectingtherightprocess,teamscangettomarketfaster,andwithanimprovedproductmarketfit.
Manyproductmanagementanddevelopmentprocessesareadoptedatthecompanylevel.Lean
ProductManagementisbestappliedattheprojectlevel,aseachprojectwillhavedifferent
requirements.Lastly,LeanProductManagementasksteamstoallocateefforttocontinuouslyimproving
theirprocessesfordeliveringproductstomarket.

UnderstandingtheProductMarketFitChallenge
Buildinguponthepreviousdiscussionontheroleofproductmanagement,theproductmanagermust
managethreedistinctareastoachieveasuccessfulproduct.Thesolutionmust:
1. Addressthecorrectcustomerproblems
2. Solvethoseproblemswell
3. Beavailablethroughanappropriatechannelforthecustomertofindtheproductandatan
attractivepriceforthecustomertopurchasetheproduct.
BusinessModelisthelabelassignedtochannelandprice(alsocalleddistributionandprice).Business
modelalsoincludesservicesanddesignelementsthatarepartofthebrandexperience.Collectively,the
threeareaslistedabovearecalledtheproductmarketfittriad(Figure7).Thesolutionisthusmadeup
oftheproduct(thephysicalproductandassociatedcomponentssuchasupdateservices,outofbox
experience,warranty,etc.)andthebusinessmodel(howitispriced,whereitcanbepurchased,howto
getsupport,thelevelandtypeofservicecustomersreceivewhilelearningabouttheproduct,
purchasingtheproduct,andreceivingsupportandtrainingfortheproduct.)
Eachoftheverticesofthetrianglemustbeanalyzedforuncertainty,andtheproductmanagermust
understandifavertexstopicisknownandwellunderstood,orifsignificantdiscoveryisneeded.The
greatertheuncertainty,themorediscoveryrequired,andthemorehypothesesthatwillneedtobe

19

tested.Ingauginguncertainly,theproductmanageraskswhetherthedomainisdefined(knownor
understood)orundefined(unknownornotunderstood).

Figure7:Productmarketfittriad

Fourdistincttypesofproductmanagementchallenges(Figure8)emergefromjustfocusingonthe
problemandproductaxes:
Optimize(TypeI)whenoptimizing,weaddresswellunderstoodproblemsinawellunderstood
problemspace.Optimizationsoftencomefromdirectfeedbackfromusersofourproducts,
conversationswithourcustomersandprospects,analysisofcompetitiveofferings,andwin/loss
analysis.Thisproductmanagementchallengeiscommonwhenmanaginganexistingproduct,orwhen
enteringanexistingmarketwithalikeproduct.Marketneeds(i.e.thearticulationoftheproblem)are
stable.Productplansandbusinessplanstendtobestableaswell(unlessthemarketortechnologyis
movingfasterthanthedevelopmentcycle.)Optimizingimprovestheproductsperformanceusually
alongthedimensionsofbetter,fasterandcheaper.Theperformanceimprovementstendtobeless
thantwicethecurrentperformanceandmoretypically5%20%alongoneormoreoftheproducts
dimensions.
MarketDriven(TypeII)thisresultsfrommarketresearchthatproducesfreshinsightsintocurrently
unmetcustomerneeds.Itisappropriatefornewproductsandmajorenhancementstoexisting
products.Ethnographicstudiesandindepthcustomerinterviewsarepopulartechniquestoprovide
initialinsightsintopossibleproblemsasolutionmightaddress.Thesemaybefollowedbysurveysto
quantifytheopportunitiesassociatedwithsolvingeachproblem.Marketneedsarestable,butproduct
plansandbusinessplanscanshiftduringthesearchforagoodsolutionfit.Performanceimprovement
overexistingproductsistypicallyintherangeof2xto10xbutinhighlycompetitivemarkets,smaller
performanceimprovementscanoftenyieldasubstantialcompetitiveadvantage.

20

TechDriven(TypeIII)techdrivenisthetypicalsolutionlookingforaproblem.Itcomesfromthe
insightthatatechnologicalchangemayprovideanorderofmagnitudeimprovementinperformancefor
aproduct,orenableentirelynewcapabilitiesthatwerepreviouslynotpossibleor,atleast,not
possibleatapricethemarketwouldsupport.Productplanswillshiftuntilthemarketneedsfora
specifictargetmarketaredeeplyunderstood.Iftheproductisenablinganewcapability,itwillshare
characteristicsofavisionaryproductwherethemarketneedswillalsoshiftasuserslearnhowto
applytheproducttotheircontext.Businessplans,likewise,canalsoshiftsignificantly.Performance
improvementsaretypically2xandgreater.
Visionary(TypeIV)Visionaryproductsliesoarefaroutaheadofcurrentcustomerexpectationsthat
customershavetroublerelatingtodescriptionsoftheoffering.Oftenthemarketfortheseproducts
doesnotyetexist.Developingbusinesscasesaroundvisionaryproductsisparticularlychallenging
becausethereexistslittleknowledgeonwhichtobaseassumptions.Marketneeds,productplan,and
businessplancanallshiftsignificantly.Visionaryproductstypicallyprovideperformanceimprovements
greaterthan10xandenableentirelynewcapabilitiesthatwerepreviouslynotpossibleor,atleast,not
possibleatapricethemarketwouldsupport.
Asmarketsbecomemorecompetitive,disruptiveinnovationhasoccurredwithgreaterfrequency.
ManagingTypeII,TypeIII,andTypeIVsolutionshavebecomeanecessarycompetencyforproduct
managers.Andyet,mostproductmanagersonlymanageTypeIandtoalesserextentTypeIIproducts.
Tohavethelargeststrategicimpactonourcompanies,productmanagersalsoneedtoknowhowto
workwiththemorechallengingTypeIIIandTypeIVproducts.Forthis,theyneedanexpandedskillset
tobesuccessful.

Figure8:ProblemProductSolutionMatrixillustrating
thefourproductsolutiontypes

BuildingupontheProblemProductSolutionMatrixandthefourproblemproductsolutiontypes,the
businessmodelwilleitherbedefinedorundefined.Inadefinedbusinessmodel,achannelalready

21

existstoreachthetargetmarket;thepricingmodel,whichdefinesboththeincrementofvaluebeing
soldandtheexpectedpriceforthatincrement,isestablished.Intotal,thereareeightwaysinwhich
Problem,Product,andBusinessModelcancombine,basedonwhethertheelementsaredefined(i.e.
established)orundefined15(i.e.unproven)(Figure9).
Optimize
(Type I)

Type

Solution

Problem

Market Driven
(Type ll)

Tech Driven
(Type lll)

Visionary
(Type lV)

Defined

Defined

Defined

Defined

Undefined

Undefined

Undefined

Undefined

Product

Defined

Defined

Undefined

Undefined

Defined

Defined

Undefined

Undefined

Business
Model

Defined

Undefined

Defined

Undefined

Defined

Undefined

Defined

Undefined

Gore
Assoc.

Salesforce

Vocera

Redbox

Example

MS Word
2010
Samsung
Galaxy

Dell

Flip

YouSendlt

Post-it
Notes

Xerox
Twitter

Figure9:Problem,product,andbusinessmodelcombinetoyieldeightdifferentproductmarketfitchallenges
Asmentionedabove,theproductmanagementprofessionhasmostlyfocuseditsattentiononTypeI
andTypeIIchallenges,wherethebusinessmodelisdefined.
However,whenoneormoreoftheproductmarketfittriadverticesareundefined,projectriskgoesup
andtheabilitytolinearlyplanandexecutedecreases.Phasegatedevelopmentprocessesbecome
impractical,astheyrequirenearperfectgatheringandanalysisofupfrontrequirementsiftheyaretobe
successful.Inanuncertainworldwhererequirementscannotbefullyunderstoodupfront,andforecasts
cannotbemadewithreasonableaccuracy,theproductmanagercanonlystatehypothesesthatneedto
betested.

CaseStudies
Withavarietyofproductmarketfitchallenges,productmanagersneedanequallyvariedsetof
processesandmeasurestokeepprojectsontrackandminimizerisk.Thesimplestcaseiswhenall
elements(problem,solution,andbusinessmodel)oftheproductmarketfittriadaredefined.Themost
challengingcaseiswhenallareundefined.Thedecisioncycle(whichgovernstheabilitytofollowa
traditionalprojectplan)isentirelydifferentforeachofthetwoextremes.Thecasestudieshereare
intendedtoillustratecompaniesthathavesuccessfullynavigatedeachtypeofproductmarketfit
challenge.Productmarketfitisonlyoneofmanyfactorsacompanyneedstogetrightinorderto

15

AdaptationfromD.Silverstein,P.Samuel,andN.DeCarlo,TheInnovatorsToolkit(NewJersey:JohnWiley&
Sons,2009)p.xxviandS.G.Blank,FourStepstotheEpiphany,(Cafepress.com,2006)pp.1216.

22

succeed.Further,thecasestudiesareprovidedasillustrationsthereisnosuggestionthatthe
companiesusedthemethodsdescribedinthisguide.

Optimizing(TypeI)
Optimizingproducessmalllevelsofsolutiondifferentiation.Typically,theseare
productsthatarenewandimprovedand,whencombinedwithanewbusiness
model,sometimeshavenodifferentiationatall.Whenamarketisnolonger
growing,optimizingoftenistheinvestmentacompanyneedstomakejustto
maintaintheirpositioninthemarketplace.
BusinessModelDefined(examples:MSWord2010,SamsungGalaxy)
Becauseproblem,solution,andbusinessmodelarerelativelywellunderstood,itispossibleforthe
productmanagertocreateareasonablyaccuratebusinesscasetodescribeanopportunityandamarket
requirementsdocument(MRD)todescribetheprioritizedneedsoftheuser.Thedevelopmentteam
canproducegoodestimatesfortheworkneededtobuildtheproductiftheyarebuildingupona
productonwhichtheyhavealreadyworked.Theproductmarketingteamunderstandshowtolaunch
andpromotetheproductandproducesolidestimatesofthelikelyrevenuethecompanycouldachieve
fromit.Thisiswhereanycompanyalreadyinbusinessspendsmostofitstime.Shortwaterfall(i.e.
serialdevelopment)methodsworkwellhere.However,ifthemarketisverydynamicrequiringextra
flexibilityortimetomarkethaslargepayoff,Agiledevelopmentwouldbepreferred.Regardless,atthe
projectlevel,thedecisionmakingcycleisverylinearandmapswelltoaphasegateprocess.
MSWord2010isanexampleofanoptimizedproduct.Itrepresentsthenextgreatestversionofthe
ubiquitousofficeapplicationWord.ItaddressesbugsandissuesuncoveredbyWord2007usersand
alsoincludesnewfeaturessuchasascreenshotfunctionandaprotectedviewfordocumentsopened
frompotentiallyunsafelocations(e.g.theInternetoranemailattachment.)Microsofthasexisting
modelstopriceanddistributetheproduct,andcanpredictwithgoodaccuracyhowtheproductwill
sell.
TheSamsungGalaxytabletisaverydifferentexample.Samsungisproducinganoptimizedalternative
totheAppleiPad.ItsmajordifferentiatingfactoristhatitisnotanAppleproduct.ItrunsAndroid,a
moreopenoperatingsystemandapplicationecosystem,anditcostslessthantheiPad.Facedwithan
everpresentthreatfromtheiPad(andiPhone),Samsungpursuesafastfollowerstrategyandwillneed
tocompeteagainstotherAndroidproducts.Timetomarketiscriticaltopreemptthecompetitionand
trytoextenditslimiteddifferentiationintheAndroidtabletmarketplaceforaslongaspossible.This
canbeasuccessfulproduct,andSamsunghasdonewellpursuingafastfollowerstrategyinthepast;
butbecauseSamsungneedstomasternewtechnologies,thereismoredevelopmentrisk.Further,the
GalaxywillneedtobeoneofmanyproductsthatcontributetoSamsungsbottomline.Although
Androidphonesandtabletsinaggregatearecatchingupor,insomecases,havecaughtupwith

23

iPhonesandiPadsformarketshare,itisunlikelyanyindividualAndroiddevicemanufacturerwillmatch
Applesvolume.
BusinessModelUndefined(exampleDell)
Pursuingaproductoptimizingstrategywherethebusinessmodelisundefinedhasthepotentialto
createnotjustasuccessfulproduct,butalsoasuccessfulcompany.Whatisinterestingaboutthese
companiesistheyoftendoitwithproductsthatlackanydifferentiationwhatsoever.Delloriginallysold
aproductcalledaPCClone.Byitsverydefinition,acloneisundifferentiated.WhatDelldiddowas
selldirectagoodqualityproduct,withgoodservice,competitive(althoughnotthelowest)prices,and
theabilityfortheircustomerstoconfiguretheirsystemsexactlyastheywantedthem.Dellevenoffered
riskfreereturnandnextdayathomeproductassistance.16Dellalsoachievedcompetitiveadvantage
throughitssuperiorsupplychainmanagement.17

MarketDriven(TypeII)
BusinessModelDefined(example:FlipCamera)
PureDigitalTechnologies,creatorsoftheFlipCamcorder,identifiedanunder
servedsegmentofthecamcordermarketandcreatedanewcategoryof
camcordercalledshootandshare.AtthetimetheFlipcameralaunchedin2007,
camcordersaleswereflat.Withinayearofitsintroduction,Fliphad17%market
shareonaunitbasis,fourpointsbehindSonys21%marketleadershipshare.
Flipcamcordersweresoldthroughatraditionalretailchannel,butPureDigitalTechnologiesredefined
theaxesofcompetition(Figure10).Thetraditionalcamcordercompaniescontinuedtoimproveareas
thathadlongbeensatisfied,suchasimagequalityandhoursofstorage.Flipcutwaybackontheseand
insteadfocusedonthreeunderservedneeds:
1. EaseofsharingvideoviaemailandtheInternet
2. Easeofshootingthereareonlyfivecontrolsonthecamera
3. Smallsize.Insteadofbeingportable,theFlipcamerawaspocketable.
FlipShare,thesoftwareforquickeditingandsharing,wasloadedontothecamcorderssolidstate
memory.AUSBconnectorwasbuiltin(sotherewerenocablestocarryorlose).Whenthecamcorder

16

http://content.dell.com/us/en/corp/ourstorycompanytimeline.aspx
Internalprocessescanprovidecompanieswithsustainedcompetitiveadvantage.Someoftheseprocessesare
withintheinfluenceofproductmanagers,suchasmarketresearch,others,suchassupplychainmanagement,are
not.

17

24

waspluggedintoacomputer,theeditingandsharingsoftwarecouldbequicklyinstalled.Lastly,itwas
pricedbelowatraditionalcamcorder.

Figure10:Flipcreatedanewcamcordersegmentbyfocusingonunderservedneedsand
cuttingbackonoverservedneeds

ThefateoftheFlipcamcorderisworthfurtherexamination.CiscoSystemspurchasedPureDigital
Technologiesin2009for$590millioninstock.Althoughstillenjoyingstrongsalesandpositivebrand
recognition,CiscoSystemsannouncedin2011thatitwasdiscontinuingtheFlipcamcorderlineaspart
ofalargerdivestmentofconsumerfocusedproducts.Oneofthestatedreasonswasthethreatfrom
smartphones,althoughFliphadagoodmanyyearsleftbeforesmartphoneswouldmakeitobsolete.18
HadFlipsmanagementteamexplorednewbusinessmodels,itmighthavepositioneditselftotake
advantageofcompetitiveofferingsandnextmarketdisrupter.Inparticular,Flipmighthavebuilta
subscriptionbusinessaroundFlipShare,offeringconsumerssafe,cloudstorageandeasysharingfor
theirmemories.OnceFlipusersaccumulatedenoughvideoonFlipShare,eveniftheychange
camcordersormovetoasmartphone,theyareunlikelytoabandontheFlipShareservice.Startup
KinKast.commightjustbethecompanythatreapstherewardsofthevideosharingandoffsitestorage
market.
BusinessModelUndefined(exampleYousendIt)
In2003,RanjithKumaransetouttoaddressamarketproblem:itwasdifficultforpeopletosendlarge
filesviaemailandFTP.HefoundedYouSendItanddevelopedanelegantsolution,wherebyausercould
uploadafiletoYouSendItviathewebandtherecipientwouldreceiveanemailwithalinktodownload

18

http://en.wikipedia.org/wiki/Flip_camera

25

thefile.SendersandrecipientswhoseemailserversblockedlargefilesfoundYouSendItimmediately
useful.
Thecompany,however,wasunsurehowtochargefortheirservice.Hadtheylookedatthetraditional
deliverymodels,theywouldhavechargedperfiledeliveredjustasthepostofficechargesperletteror
package.ButitmusthavestruckRanjiththattheestablishedpackagedeliverybusinessmodelwould
nottranslatewelltoelectronicdocuments.Thecompanyexperimentedwithadvertisingbasedrevenue
butthisdidnotgenerateenoughrevenue,fortworeasons.First,usersgototheYouSendItsitetoeither
sendorretrieveafiletheyhaveataskontheirmindandtheydontlingeronthesite,sotheyare
unlikelytoclickads.Second,YouSendIthasnowaytoworkoutausersinterests(theway,say,Google
canbyexaminingasearchterm,oracontentsitecanmatchadvertisementswithanarticle),so
advertisementscantbetargetedtotheaudience.
Thecompanythenexploredafreemiummodel,inwhichthebaseservicewasfreeandhighervalue
servicesrequiredpayment.YouSendItslicedvaluealongmanydimensions,includingtotaldownloads
permonthandmaximumfilesize(which,althoughithasbeenreduced,remainsgenerousforfree
users);confirmeddelivery;passwordprotection;fileexpirationdatecontrols;andtheabilitytosend
multiplefilestogether.UserscansubscribetoYouSendIttogetthepremiumfeaturesandafewofthe
featurescanbepurchasedonapertransactionbasis.
Morerecently,YouSendItdevelopedbusinessspecificsolutions.Thecoreservicehaslargelystayedthe
same,butthebusinessspecificofferingissoldonaperseatbasis,andincludescustombrandingand
userlevelreporting.ThecompanyevenbecameSAS70TypeIIcompliant.Thatisntabenefitfor
individualusers,suchascreativeprofessionals,butitsimportanttoenterprisesandlawfirmsusingthe
YouSendItsolution.

TechDriven(TypeIII)
Inthetechdrivencategory,companiesselectthesolution,usuallydrivenbya
technologicalinnovation,andthenseewhereandhowtheycanapplyit.
BusinessModelDefined(example:GoreAssociatesandVocera)
W.L.Gore&Associatesisatechdrivencompany.Thecompanyspecializesin
flouropolymersandconstantlyseekstoidentifyproductsthatwouldbe
enhancedbytheiruse.GoreisbestknownforGoreTex,itssemipermeablefabriccoatingthatisused
towaterproofouterwearandfootwearwhileremainingbreathableandcomfortablefortheuser.But
theyalsoproduceproductsfortheelectronics,aerospace,automotiveandmedicalindustries,among
others.Mostcompanieswouldnotseektocompeteinsuchvariedmarkets,butGoreisatechnology
drivencompany.Theystartwiththesolution,andidentifyproblemsindependentofindustry,where
theycanapplytheirknowhowwhichtheyhavebeendoingforover50years.

26

Voceraisaclassictechnologydrivenstartup.ThefounderssawhowthreetechnologieswirelessLANs
(localareanetworks),voicerecognition,andahandsfreecommunicationbadgecouldcombinetore
definehowmobileworkerscommunicatewithinafacility,replacingclumsypagersandnoisyoverhead
announcementsystems.AworkerusingVocerasproductcancontactanyotherworkerbytouchinga
singlebuttonandstatingthenameofthepersontowhomtheywanttospeak.Thebusinessmodelwas
basedonenterprisesales:theywouldsellthehardwarebadgesandlicensethesoftware.Theonly
problemwasthatVocerawasnotsurewho,ifanyone,hadanacuteenoughpaintoactuallybuythe
solution.Afterbrainstormingpotentialverticalsandthenconductingtargetedfocusgroups,theyhit
goldwithhospitalsandmedicalfacilities.
BusinessModelUndefined(examples:SalesforceandRedbox)
SalesforcesfounderMarkBenioffhadabigvisionofsoftwarebeingdeliveredasaservice(SaaS)and
fundamentallychangingthewayenterprisesoftwarewasdevelopedanddistributed.Salesforce
exploitedtheInternettoachievethis,andhadtodevelopamultitenantplatformtocreateeconomies
ofscale.19Theinitialsolutioncouldhavebeenappliedtoanyenterpriseapplication,butCRMemerged
asthetopcandidateforSaaSdelivery.Salesforcenowhadtotestitshypothesis.Itsinitialsolution
soughttobenobetterinfeaturesandfunctionsthanproductsthatalreadyexistedinthemarketplace.
TheentirefeaturesetwasalreadydefinedbythemajorplayerssuchasSeibelSystems(lateracquired
byOracle)alreadyintheCRMspace.
Salesforce,however,wasntsellinglicensedsoftwarewithbigupfrontfees,yearlymaintenance,andthe
needforaninhouseITstafftomaintainthesolution.Salesforcesbusinessmodelwasfundamentally
different.Itsoldanondemandsolution,deliveredthroughtheInternet.Itofferedcustomersthree
greatbenefits:apayasyougomodel,averyattractivepricepoint,andfreedomfromneedinga
dedicatedITstafftosetupandmaintainthesystem.Theproductitselfwasactuallyinferiortomanyof
thealternatives.Thewebdidnotsupportdynamiccontentwhen
Salesforcelaunched.Theuserhadtomanuallyclickarefreshbuttonto
seedataupdateonthescreen.Further,theInternetcouldbeslowin
thosedaysandthetimetorendernewscreensoftenseemed
interminablylong.ButSalesforcewasntcompetingonfeature;itwas
competingonanewbusinessmodelandusinganewtechnologyto
disruptthestatusquo.Indoingso,SalesforcebroughtCRMtoawhole
newmarketofsmallandmediumsizedbusinessesthatcouldnot
Photo:RedboxRentalKioskoutside
previouslyaffordanenterpriselevelCRMsolution.

retailstore(Source:
http://www.redbox.com/content/mediacenter/w
algreens1.jpg)

19

BeforeSaaStherewereASPsorApplicationsSolutionProviders.Theseweresingletenanthostedsolutions
deliveredthroughtheInternet.AlthoughanimportantevolutionarysteptoSaaS,ASPsdidnotfareverywellas
theircostcouldnotbeloweredenoughtoenableanewsegmentofthemarkettoparticipate.

27

TheDVDKioskrentalcompanyRedboxstartedfromthesolution,whichwasvending.Vendingprovides
analreadyestablishedbusinessmodel.Redboxfirsttestedtheirsystembysellinggroceries,placingfour
kiosksintheWashingtonMetropolitanAreathatoffereditemssuchasmilk,eggs,andsandwiches.
Strategically,RedboxalsotestedasecondconceptaDVDrentalkiosk.WithintheyearRedboxpulled
thegrocerykiosksandpivotedtofocusthecompanysfullattentionontheDVDrentalmarket.Within
fouryearsRedboxsurpassedBlockbusterfornumberofUSlocations,20whichnownumberof27,000.
Theyhaverentedoveronebillionmoviestodate.21
Vendingisoftenapremiummodelcenteredaroundconvenience.ButfortheDVDmarket,Redbox
pursuedacombinedconvenienceanddiscountstrategy.Moviesrentedfor$1pernight,muchlessthan
Blockbuster.Further,vendingisusuallyaonewaytransaction:thecustomerbuystheproductand
consumesit.RedboxskioskshadtoaccommodatetherentalDVDbeingreturned.

Visionary(TypeIV)
BusinessModelDefined(example:PostitNotes)
Postitbrandnotes,madeby3M,startedasatypeIIItechnologydrivenproduct.
Dr.SpencerSilver,a3Mchemist,developedthetechnology,alowtackreusable
pressuresensitiveadhesivein1968.Heshoppedtheideaaround3Mforoverfive
yearstryingtofindaproblemthattheadhesivecouldsolve.In1974,hisco
workerArtFrysawthepotential.Frysanginhischurchchoirandwasfrustratedwhenthebookmarks
heusedtomarkthedifferenthymnstobesungfelloutofthebook.FrybelievedSpencersadhesive
couldbeusedtocreateareusablebookmark.22Employeeswithinthecompanylikedtheproduct,but
didntstartusingtheminlargevolumes.Thenoneday,Frycutoutpartofastickybookmarkandposted
anotewithaquestiononthefrontofthereporthewaswriting.ThiswasFryseurekamomentbefore
long,3Mstafferscouldnotgetenoughsamplesofthisnewversionoftheproduct.23
3MlaunchedPostitnotesinfourcitiesin1977.Salesweredisappointing,andtheteamrealizedthey
neededtogiveoutsamples.ConsumersdidnotdirectlyunderstandtheproblemthePostitsolvedand
howusefultheproductcouldbe.3MgaveoutsamplesinBoise,Idahoandusersratedtheirintentto
repurchaseat95%.24Theteamknewtheyhadasuccessontheirhands.Theproductlaunched

20

http://en.wikipedia.org/wiki/Redbox
http://www.redbox.com/facts
22
ArtFryandSpencerSilver:Postitnotes,InventoroftheWeek,LemelSonMIT,
(http://web.mit.edu/invent/iow/frysilver.html)
23
A.Fry,S.Silver,andS.Duguid,FirstPerson:WeinventedthePostitNote,FT.com,December3,2010
(http://www.ft.com/cms/s/2/f08e8a9afcd711dfae2d00144feab49a.html#axzz18hyDnyKX)
24
Ibid.
21

28

nationallyin1980,andwithintwoyearsPostitnoteswereconsideredanecessityineveryoffice,
alongsidepensandpaperclips.25
ThebusinessmodelforPostitswasclear.3MsoldmanyofficeproductssuchasScotchtapeandglue
sticksthroughofficesupplycompaniesandretailstores.PostitNotesusedtheexistingdistributionand
saleschannelstoreachthecustomer.
BusinessModelUndefined(examples:XeroxandTwitter)
Xerox,foundedin1906,developedtechnologythat,decadeslater,madeplainpaperphotocopying
possiblewiththelaunchoftheXerox91426photocopierin1959.Theequipmentwaslarge,weighing
almost650pounds,andexpensive.27Beforecommercializingthetechnology,XeroxapproachedIBM
aboutsellingitspatents.IBMcommissionedArthurD.Little,Inc.(ADL),awellregardedtechnologyand
managementconsultancyinCambridge,MA.ADLconcludedthatifthephotocopierdisplaced100%of
thecarbonpaperanddittographmarket,itwouldnotjustifytheexpenseofcommercializingthe
product.Further,thecopierswouldbeoutofreachofmostbusinessbudgets,limitingthetotalmarket.
Mostofusknowtheendofthisstory.Xeroxlaunchedanentirenewindustrysegmentandgrewtobe
anindustrytitan:IBMneverenteredthephotocopiermarket.
HowcouldADLsanalysishavemissedthemarkbysuchalargemargin?ADLdidnotlackintellectual
horsepower,buttheywerebeingaskedtoforecastamarketinthevisionaryquadrant,whereuser
behaviorcannotbeeasilypredicted.Intheaverageofficein1959,secretariestypeddocuments(there
werenowordprocessors).Whenmorethanonedocumentwasrequiredtheyinsertedcarbonpaper
betweenmultiplesheetsofpaper.Whentheymadeamistake,theyhadtomanuallycorrectthe
originalandeachofthecopiesoneatatime.Thetermsccandbcc(carboncopyandblindcarbon
copy),asusedinemail,arevestigesofthisera.Officeshadotherprocessesthatseemunimaginable
fromtodaysperspectives.Theyhadcentralfilingsystemsthatsecretariesindexedandmeticulously
maintained.Becausecopiesweresohardtomake,originalsweresentaroundininterofficeenvelopes
withdistributionlistsattached.Whenthefirstpersononthelistreadthenotice,theycrossedtheir
nameoffandputtheenvelopebackininterofficemailorputitonthedeskofthenextpersononthe
list.Thiscyclerepeateduntileveryoneonthelisthadreceivedthenotice.
Inhindsightwecanseethatasecretarywouldlovetobeabletotypeonceandcopyasmanytimesas
theywanted.Further,iftheymadeamistake,howwonderfultocorrectonlythemasterandrunoffa
newsetofcopies.Likewise,whyslowlypassaroundanoriginalwhenyoucaneasilymakecopies?But

25

Ibid.ArtFryandSpencerSilver:Postitnotes,InventoroftheWeek
Thecopiercouldreproducea9x14
27
http://en.wikipedia.org/wiki/Xerox_914
26

29

toseethepossibleistoseefirstthatthecurrentprocesscouldbeimproved.Photocopieswere
expensive,whereassendinganoriginalaroundonadistributionlistwasperceivedasbeingfree.
Xeroxalsomadeabrilliantmoveinstructuringtheirbusinessmodel.Theyadoptedarazorandblade
strategy.Knowingmostcompaniescouldnotaffordorwouldnotbudgettopurchaseanexpensive
photocopier,Xeroxplacedthemachinesforfreeandchargedforcopies.Thisalloweduserstolearnall
theinterestingusesforaphotocopier.OncepeoplegotatasteofhowpowerfultheXeroxmachine
was,usagegrewandgrew.
TheconceptforTwitteremergedfromadaylongbrainstormingsessionatpodcastingcompanyOdeo.
Theassumptionwasthataservicethatallowedanindividualtocommunicatebybroadcastinga140
characterSMSmessageswouldbeuseful.28Theserviceinitiallygainedlittletractionwhenitlaunchedin
2006.Ninemonthslaterin2007,Twitternegotiatedtohavetwolargeflatpaneldisplaysplacedinthe
hallwaysofAustinsSouthbySouthwest(SXSW)musicfestivaltodisplaytweetsabouttheconference
byconferenceattendees.29Usagespiked.Twitterreachedacriticalmassofusers.Withinashorttime
after,tweetingwouldenterintotheculturallexiconofAmericaandmuchoftheworld.
Beyondconferences,Tweetinghadatribalappeal,allowinguserstocoordinatetheirsocialactivitieson
aFridaynight,breakandsharenewsstories,getaninsightintothelivesofpublicfiguresandchatabout
liveTVevents.Celebritiesdiscovereditasawaytoengagetheirfanbase.Twitterhasevenbeenused
tomobilizesocialrevolutionariesandforceregimechangeintheMiddleEastduringtheArabSpring.30
AsofMarch2011,Twitterhadover200millionusers31sendingover140milliontweetsperday.32
Althoughtheservicehasprovenitsusefulness,itisstillsearchingforabusinessmodel.Somerevenue
hascomefromsellingtherightstoincludeTwitterpostsinsearchresultsforGoogleandMicrosoft.It
wasntuntil2010,fouryearsafterlaunch,thatTwitterattemptedtoseriouslymonetizeitsuserbase
withanadvertisingmodelofpromotedtrendsandtweets.33Investors,however,believeTwitterhas
potential.Thecompanyhasraisedover$360millionincapitalasofJune2011.34CouldJackDorseyand
hiscofoundershavecreatedafinancialforecastforTwitterinwhentheyfoundedthecompanyin
March2006?Couldtheteamevenhavecreatedanaccurateproductroadmap?Itwouldhavebeena
foolserrand.

28

http://en.wikipedia.org/wiki/Twitter
http://www.quora.com/WhatistheprocessinvolvedinlaunchingastartupatSXSW
30
http://en.wikipedia.org/wiki/Twitter_usage
31
M.Shiels,TwittercofounderJackDorseyrejoinscompany,BBCNews,March28,2011
(http://www.bbc.co.uk/news/business12889048)
32
L.Rao,NewTwitterStats:140MTweetsSentPerDay,460KAccountsCreatedPerDay,TechCrunch.com,
March14,2011.
33
J.P.Mangalindan,Twittersbusinessmodel:avisionaryexperiment,CNNMoney.com,July9,2010.
(http://money.cnn.com/2010/07/09/magazines/fortune/Twitter_business_model.fortune/index.htm)
34
http://www.crunchbase.com/company/twitter
29

30

MatchingtheDiscoveryandDevelopmentProcessestothe
ProductMarketFitChallenge
Inallthecasestudyexamplesintheprevioussection,withtheexceptionofMicrosoftWord2010,either
timetomarketorflexibility(whichistheabilitytheadjustplansquicklytoassimilatenewinformation)
werecriticaltosuccess.Theurgencyandflexibilityneedsweredrivenby:

Achievingproductmarketfitwithminimalinvestment,or
Maximizingtheamountoftimethecompanysproductenjoyedmaximumdifferentiationinthe
market.

Leansfocusontimeandlimitingworkinprogresstoachieveflexibilitycanofferproductmanagersa
sourceofgreatcompetitiveadvantage.

Problem,Product,andBusinessModelDefined
Whentheproblem,productandbusinessmodelareallwelldefinedoreasilydefinable,traditionalVoice
ofCustomer(VOC)researchmethodsworkwell.Theproductmanagershouldmeet,talktoandobserve
customersusingthecompanysproductandthecompetitorsproducts.Usagedata,whenavailable,
shouldalsobeanalyzed.Inaddition,inputshouldbegatheredfromotherstakeholderslikesales,
customersupport,accountmanagement,etc.
Customersandstakeholdersunderstandtheproductandwhatitdoesforthem.Theywillhavestrong
viewsonwhatfrustratesthemandwhatcouldbeimproved.Thecustomerwilllikelyprovidefeedback
inthesolutionspaceabouthowtheproductcouldbechanged.Theproductmanagermustbeskilled
enoughtoprobetouncovertheunderlyingproblemthecustomeristryingtoaddresswiththesolution.
Quantitativesurveyscanfollowtounderstandhowpervasiveanygivenproblemisandthelevelof
satisfactionwiththecurrentsolution.Businesscases,forecasts,andplanscanbedeveloped.The
projectcanfollowafairlylinearpathof:research,prioritize,developsolutionconcept,validate
proposedsolutionconcept,build,launch,measureagainstplanandrepeat.

ProblemUndefined
Iftheproblemisundefinedorunknown,theproductteamneedstoconductresearchwiththeintentof
discovery.Asresearchisexpensive,theteamneedstoprioritizewhichcustomersegmentsand
categoriesofproductsareofinterest.Differenttechniquescanbeused,basedonthelevelof
uncertaintyabouttheproblem.ThetechniquesgenerallyfallundertheheadingofVoiceofthe
Customer(VOC)research,withthegoalofproducingalistofproblemsbyrelativeimportanceand

31

satisfactionwithcurrentalternatives.35UnliketheOptimizationchallenge(seeUnderstandingthe
ProductMarketFitChallenge,page19),theVOCresearchmustbeperformedinmuchgreaterdepth.
Someofthetechniquesinclude:

Ethnographytheobservationandsometimeinterviewingofuserstoidentifyproblems.This
includestheUserCenteredDesignmethodofContextualInquiry.36
IndividualInterviews
Focusgroupsgroupdiscussions
Apprenticing37whenyouperformtheroleofthetargetcustomertoexperiencefirsthandthe
challengesbeingfaced.

Outofthisresearchcomesalonglistofproblemstatements.Quantitativeanalysisandsurveyscanthen
beusedtoscoretheproblemsuncoveredintheinterviewandobservationstages.Thisdataisfurther
slicedtoidentifysegmentsofuserswhosharesimilarviewpointsabouttheimportanceofthedifferent
problems.
InthecaseoftheTechDriven(TypeIII)challenge,theresearchwillfirstfocusonuncoveringthegeneral
problemsusershave;furtherfeedbackcanthenbesolicitedbydiscussingthesolution.Ifaworking
productexists,itcanbegiventouserstoactuallyuse.FortheVisionary(TypeIV)challenge,the
approachissimilar,butwecantexpectuserstobeabletoprojecttheirneeds,orforeseewhetherthe
solutionwillsolvethem.Theusershavetobeallowedtousetheproductanddiscoverhowitcanmake
theirlifebetter.

ProductSolutionUndefined
Iftheproductsolutionisundefined,buttheproblemiswellunderstood,theproductteamfirstneedsto
brainstormpotentialsolutions.Thesecanthenbevettedthroughconcepttestingtoprovideguidance
aboutcustomersinterestandpriorities.Concepttestingistheactofsolicitinguserfeedbackinthe
solutionspace.Theuserisintroducedtoapotentialsolutionandaskedtoreacttoit.Eachconcept
representsahypothesistobetestedabouttheprioritiesandtradeoffsinthesolutiondesign.In
general,therichertheconcepttest,thebetterthefeedback.38Becausetheproblemisvalidated,the
primaryquestionis,cananadequatesolutionbedevelopedtoaddressit?Attheearlystages,the
productmanagerwantstobetestingmultipleconceptsandthedevelopmentteammightverywellbe

35

http://en.wikipedia.org/wiki/Voice_of_the_customer
http://incontextdesign.com/contextualdesign/
37
TheApprenticeisdescribesinInnovationGamesbyLukeHohmann,(Boston,AddisonWesley,2007),pp.106
109.
38
Ifyouarelookingfortheusertoaidyouinthedesignoftheconcept,however,lowerfidelityconceptsmaywork
betterbecausetheuserwillbemorecomfortablesuggestingchangestoit.
36

32

pursuingmultiplesolutions.Thefocusinterview(conductedinagrouporindividually)isatraditional
methodforgatheringconceptfeedback.
IntheBusinesstoConsumer(B2C)orBusinesstoSmallBusinessspace,afasterandlessexpensive
methodoftestingistobuildasmallwebsiteandrunaGoogleAdwordscampaignfortheproduct.By
emphasizingdifferentelementsofthesolutioninthecampaign,theproductmanagercanlearnabout
whatcustomersvaluemostandhowtheproductshouldbepositioned.Further,differentcampaigns
cantakeuserstodifferentlandingpagesorsitesexplainingdifferentconcepts.Thecustomercaneven
beaskedtotakeaction,includingcommittingtopurchase.Purchaseisthebestvalidationforany
solution.Actionscouldincludeuserssubmittingemailiftheywouldliketobenotifiedwhentheproduct
isavailableorplacingapreorderfortheproduct.Anotherinterestingtwistonactuallyadvertisingthe
conceptistouseAdWords(Figure11)toseehowmanypeoplearealreadysearchingforalikesounding
solution.Thesemethodsdonotreplacetherichnessofaoneononeoronetofewdiscussion,which
canoftenproduceentirelyunexpectedinsights.Butthesetechniquescanclarifypositioningand
validatethatcustomerswillpartwiththeirmoneyforthesolution.

Figure11:GoogleAdwordsreportforvideowatchshowsanastoundingonemillionmonthlysearchesas

wellashintsatsomeoftheintendeduses.Forreference,Rolexreceivesjustoverfourmillion
Atsomepoint,thecompanyhastobuildtheproductandseeifitadequatelyaddressestheneed.At
thisstagethecompanyshouldonlybeconcernedwithbuildingaworkingprototypeandgettingitinthe
handsofatargetuserasquickly,andforaslittlemoney,aspossible.Thegoalisavalidatedproofof
concept.Whatevercanbeleftoutshouldbeleftout,oratleasthandledmanuallyoutsideofthesystem
thisispossiblewithmanyfeatures.Earlyecommercesystems,forexample,deliveredordersviafaxto
fulfillmentcentersbecausethetwosystemswerenotintegrated.Inthisstage,theproductteamison
quickproductiterationsandlearningcycles.

33

Sincethecompanyintendstoselltheproduct,trytoclosethesalewherepossible.Thisnotonly
validatesthatthesolutionsolvestheproblem,butalsothatthesolutioncreatesenoughdifferentiated
valuetosupporttheintendedpricepoint.ThisisparticularlyimportantforB2B(businesstobusiness)
productsthatcantbeeasilytestedonline.Theproductmanagerneedstoknowifthecustomerwill
spendtheirbudgettosolvetheproblem.Inthiscase,theproductmanagerislookingforatypicalearly
adopter,whichissomeonewhoknowstheyhavetheproblem,iswillingtocobbletogetherasolution,
mayhavealreadytriedtodoso,andhasbudgettosolveit.39

BusinessModelUndefined
Whenthebusinessmodelisundefined,itmustalsobetested.First,businessmodelscanbe
prototyped.AgreattoolforworkingthroughvariousBusinessModelsistheBusinessModelCanvas
(figure12).Itcanbedownloadedforfreeat:http://www.businessmodelgeneration.com/canvasafull
explanationcanbefoundinthebookBusinessModelGeneration(2010)byAlexanderOsterwalderand
YvesPigneur.

40
Figure12:BusinessModelCanvas

39

GeoffreyMoore,CrossingtheChasm(NewYork:HarperBusiness,1991)pp.3338.

34

Onceanumberofqualitativemodelshavebeenexplored,themostpromisingcanbefurtherdeveloped
inExceltounderstandthekeymetricsandperformanceindicatorsandthefullpotentialforeachmodel.
Justasaproductconceptcanbedemonstratedinvaryingfidelities,sotoocanthebusinessmodel.
Makethesolutionandbusinessmodelconceptsappearasrealaspossibleandseekfeedbackfrom
potentialusersandpartners.Youcanevenproduceavideothatstagesthesettingandinteractionof
thebusiness.Thisisparticularlyusefulfortestingoutretailconcepts.Iftheparticipantsaskwhenthe
solutionwillbeavailable,thatisagoodsign.
Webbasedsolutionsdefinitelyhaveanadvantagewhenitcomestoeaseoftestingofthebusiness
model.Thesolutioncanbebuilt,andtheproductmanagercangatherdataonuniquevisitorstothe
site,conversionratesandotherstatisticsthatmightberelevanttoagivenbusinesssuchasretention
rates,activityonthesite,numberofpurchases,averagerevenueperuser,costtoacquirenewusers,
andmore.Hypothesescanbetested,andliveexperimentscanbedeployedonsitetoseeifthechanges
improvethemetricsandkeyperformanceindicators.
ForB2Bcompaniesthatselldirect,testingisalsoeasy:newmodelscanbetestedwitheachsalescall.
Earlyonthecompanymaysupportverydifferenttermsinitscontractsasitteststheacceptanceofa
newmodel.Thechallengethenbecomestomovetheoneoffagreementsduringthediscoveryphase
tothestandardagreementsastheyreachtheirrenewaldates.
Thehardestbusinessmodelstotestarethoseinvolvingchanneldistribution.Ittakestimetogrow
channelrelationships,andfurthertimeandefforttogetthosepartnersactive.Theproductmanageris
competingwithcurrentrevenuegeneratingproducts.Creatingaproductivechanneltakestimeand
feedbackisdelayed.Itisrecommendedyouworkwithpartnerstocloseinitialsalessoyoucanlearn
fromeachexperienceuntilarepeatablesalesprocesshasbeendeveloped.
Itshouldbeemphasizedthatthesalesforceorchannelshouldnotbescaleduntilthesolutionfit,
distributionmodel,andpricinghavebeenvalidated.Thefirstjobissellingtoearlycustomers.Thenext
jobisinterviewingthemtoensuretheproductmeetstheirneedsand,ifso,howtheyareusingthe
product.Althoughwetrytoinfluencehowcustomersperceiveourproducts,positioninghappensinthe
customersmind.Therefore,wewanttoheardirectlyfromthecustomeraboutwhattheyfindvaluable
inthesolution;ideallyitmatcheswhatwethinkisvaluableaboutoursolution,butitdoesntalways
happenthatway.Oncethepositioningandsalesprocessarevalidated,wecanlookatscalingthe
business.

40

BusinessModelCanvasusageisgovernedbyCreativeCommonsAttributionShareAlike3.0Unportedlicense.
http://creativecommons.org/licenses/bysa/3.0/

35

TwoorMoreVerticesUndefined
Astheproductmarketfittriadbecomesincreasinglyundefined,thegreatertheneedforquickiteration.
Companiessometimesneedtoiteratetodeveloptheirunderstandingoftheproblem,thesolution,and
thebusinessmodelallatthesametime.Thefasteracompanycaniterate,therefore,themore
hypothesesthecompanycantest;themorehypothesesitcantest,themorelikelythatthepathto
successwillbeidentified.Alternatively,ifasuccessfulpathdoesnotemerge,thenthefasterthe
companycaninvalidateaprojectfocusarea,thefasteritcanshiftthoseresourcestoamorepromising
idea.Speedandflexibility,onceagain,areourfriends.

ValidatedLearning
Asstatedearlier,inmanysituations,creatingareliablebusinesscase,forecast,anddesignspecification
foraproductisjustnotrealistic.Thesoonercompanies,productteams,andproductmanagersare
willingtoacknowledgethattheydonthavealltheanswers,norwilltheyhavealltheanswersupfront,
thebettertheywilldoatmanagingtheuncertaintiesandrisksofnewproductdevelopment.Thus,the
mostwecanaskofanyteamistodelivervalidatedlearningatallstagesofthedevelopmentprocess.
Thestepsareasfollows:
1. Identifytheproductmarketfitchallenge(TypeI,II,III,orIV).
2. Recordtheknowledgethatisknownordefined.
3. Stateassumedproductpositioning:problem,targetcustomer,typeofsolution,whatit
addresses,andhowitdiffersfromthealternatives.
4. Identifytheinitialdiscoverystepstogroundtheproductteamintheproblem,productsolution,
and/orbusinessmodelspace.
5. Documentthehypothesesthatneedtobetestedfortheunknownorundefinedareas.
6. Determinethefastestandmostresourceeffectivewaytovalidateeachofthehypotheses,so
theproductteamwillbeabletomakeadecisionaboutwhethertomoveforwardorrethink
theproblemandrunanewvalidationtest.
7. Returntostep3andrepeat.

36

Figure13:Producingvalidatedlearningrequiresmanycyclestoconvergeonaviableproductmarketfit.Italso

requiressomeresetswhenahypothesisturnsouttobefalse.Duringthosetimes,wecyclecounterclockwise.
Dependingonhowmuchisunknown,differentlearningcyclescanbeappliedtoreachvalidation:

1. Discovery,Hypothesis,Test,Learn(DHTL)asportrayedinFigure13.anddiscussedabove,this
modelstartswithdiscoveringorresearchinganareaofinterest,developinghypotheses,testing
thosehypotheses,andlearningordrawingconclusions.ThissetsupthenextDHTLcycle.This
modelsupportsproductmanagementtasksandcanbeappliedtoqualitativeandquantitative
researchincludingobservation,concepttesting,surveys,andliveproducttesting.
2. PDCA(PDMA)(PDSA)Plan,Do,Check,Act(Plan,Do,Measure,Act)(Plan,Do,Study,Act)isalso
knownastheDemingcycle.Thismodelassumesthescientificmethodcanbeapplied,anda
statisticallysignificantdatasetcanbeacquired.Itworksverywellforwebanalyticsand
quantitativestudies.
3. InspectandAdaptmakefrequentinspectionstoensuretheprojectismovingintheright
directionandadjuststheplanbasedonthenewinformation.Inspectandadaptisperfectfor
empiricalprocessesusuallyassociatedwithcreativeendeavorswherenewknowledgecanonly
belearnedfromexperience.TheScrumsoftwaredevelopmentframeworkisbasedonthis
model.

37

4. Build,Measure,LearnThismodelpromotedbyLeanStartup41seekstobuildthesimplest
productpossible,validateitwithcustomers,andlearnreadyforthenextround.Thisisthe
reverseofthetypicalphasegateprocess,inwhichwelooktolearneverythingupfrontbefore
building.Thepointhereistodevelopthehypothesisandbuildsomethingsothatfeedbackcan
becollectedinthesolutionspace.
Thecommonthreadwithintheseprocessesisdevelopingahypothesisandtestingit.Itisimportantto
doitquicklyandasinexpensivelyaspossible.
Sometimeswecantestaconceptdocument,sometimesaprototypeworkswell,andothertimesonly
theactualproductwilldo.Often,weneedtodomorethanone.Themorevisionarytheproduct,the
harderitistogetaccuratefeedbackwithjustaconcepttest.Furthermore,howtheproductistestedis
alsoimportant.Webanalyticscanquantifyhowmuchbetteronedesignisoveranother,butlittlemore.
Wehavetotalktouserstounderstandwhyonedesignispreferredoveranotherdesign.
LukeHohmann,thecreatorofInnovationGamesresearchtechnique,startsallresearchprojectswith
twosimplequestions:42
1) Whatareyourquestions?
2) Whatwillyoudowiththeanswers?
Wecanthinkaboutthefirstquestionasthehypothesis.Thesecondquestionismuchmoreimportant:
whatdecisionwillyoumakebasedonyourlearning?
Further,atsomepointintheprocess,youmusttrytoselltheproduct,andthesoonerthebetter.Ifyou
canproduceascopeddownversionoftheproductorproduceitinsmallquantitiesandsellit,great!If
youcantakepreorders,great!Forenterprisesoftware,evengettingafivefigurecommitmentfor
conceptdevelopmentisagoodtest.Testingthecustomerswillingnesstoexchangevalueisanecessary
validation.Everythingelseisjusttalk.
Lastly,forteamstosuccessfullyworkintightloopsofhypothesiscreationandtesting,thedevelopment
processeshastomatch.AnAgiledevelopmentprocessthatcanelegantlysupportchangeisanecessity.
Optimize(TypeI)istheonlyproductmarketfitchallengewheretraditionalserialdevelopmentmaystill
beconsidered,andwouldbepreferredforlegacycodebaseswherethecostofchangeishighbecause
ofcodeinterdependenciesandlengthytestingprocedures.

41
42

http://theleanstartup.com/
LukeHohmann,InnovationGames(Boston:AddisonWesley,2007)p.9.

38

KeyProductDiscoveryandBusinessModelQuestions
Manyquestionsneedtobevalidated.Belowisasubsetofthemostbasicones43.Itsimportantto
rememberthat,duringanytestofahypothesis,youmustremainopentothechanceofdiscoverythe
suddenrealizationofanunanticipatedinsight,ortheidentificationofanewpathofinquiry.

Project
1. Whatarethebusinessobjectivesofthisproject?
Anobjectiveisameasurableoutcomeatapointintime.ForanOptimizingproject,anobjective
mightbetopreservemarketshare,improveretentionby2%,increaseusageby10%,etc.For
MarketDriven,thegoalmightbetocreateanewlineofbusinessforthecompanytoachieveits
growthtargets;interimobjectiveswouldbedevelopedtoensuretheprojectwasmovinginthe
rightdirection.FortheTechDrivenproject,thegoalwouldbetoidentifyatargetmarketwhose
memberswouldpurchasetheproduct(ifavailable)andworkwiththosememberstocomplete
therequirementsanddesignofthefinalproduct.ForaVisionaryproduct,theobjectivemight
bebuildacommunityof10,000userstounderstandhowtheywilluseanewproduct,suchasa
mobileversionoftheapplication,aswellasbaselinemetricsforconversionratesandclick
throughratesonpremiumservicesandadvertisingrespectively(refertoUnderstandingthe
ProductMarketFitChallenge,page19).
2. Howdoestheprojectsupportthecorporategoals?
3. Arewetherightcompanytobringthissolutiontomarketandwillwebeabletocompete
effectively?

Problem
1. Whoisthecustomer(bespecific)?
a. Whoistheuser?
b. Whoisthebuyer?Aretheythesameperson?
c. Whoinfluencesthepurchaseorisimpactedbythepurchase(answersmightbeanIT
manager,aspouse,achild,etc.)?
d. Whoapprovesthepurchase?
2. Whatproblemdoeseachofthecustomerswantsolved?
a. Statetheproblem.
b. Describethescenariowhentheproblemisencountered.
c. Dodifferentsegmentsexistwithdifferentneeds(usageorbuying)?

43

AmorecompletelistisavailableintheMasterProductPlan.docxintheProductManagementLifecycleToolkit.

39

d. Inconsideringtheearlyproduct,whichsegmentsandusers:
i. Aremostvaluable?
ii. Willthesolutionbeoptimizedfor?
iii. Willthesolutionsupport?
iv. Willthesolutionexclude?
3. Whatobservationaland/ornumericevidencehasbeencollectedtosupporthowcommonand
urgenttheproblemis?
a. Howdocustomersranktheimportanceofsolvingthisproblem?
b. Howdocustomersranktheircurrentsatisfactionwiththecurrentalternatives?
c. Whatevidenceexiststhatcustomersarewillingtopaytosolvethisproblem?
4. Dowebelievethereareenoughcustomerswillingtopaytosolvethisproblemtoconstitutea
largeenoughmarketworthpursuing?

Product
1. Whataretheircurrentoptionsforsolvingtheproblem(remembertoincludedonothing)?
2. Whatarethestrengthsandweaknessesofthoseoptions?Remembertoconsidernotjustthe
productbutalsoservice,experience,easeofpurchase,etc.
3. Whatisthemarketentrystrategy(Figure14:Ansoffsproductgrowthmatrix)?44
a. Areyoucreatinganewmarket?
b. Areyouenteringanexistingmarketwithanoptimizedproduct?
c. Areyoucreatinganewsegmentwithasimpler,lessexpensiveofferingthattargets
userswhocurrentlyarenotbeingservedbytheexistingsolutions,orwhoseneedsare
beingoversatisfied?
d. Areyoucreatinganewsegmentwithanicheproduct?
Thisisacustomerintimacystrategy,whichismeetingtheneedsofaspecificvertical
segment(e.g.accountants)betterthananyoneelse.Whenpickingthisstrategy,there
aretwogrowthpaths:
Continuetoidentifybroaderneedsofthatverticalandexpandtheofferingtoserve
thoseneeds.Thus,thecompanywouldcreatenewproductsforitsexistingmarket.
Adaptthecurrentproducttoadditionalverticals.
GeoffreyMooreusesthemetaphorofabowlingalley,inwhicheachnewapplication
areaandverticalsegmentcanbeviewedasapin.45Thegoalistoknockoverenough
pinstoscoreastrikewherethecompanysproductsandfootprintcoverawide
swatchofneedsacrossmultipleormostverticals.

44

SteveBlankinFourStepstotheEpiphanyhasanexcellentdiscussionanddetailedprocessonthestepstopursue
foreachofthefourmarketentrystrategies.Blankusesthetermresegmentwhenreferringtocreatinganew
low,endofferingornicheoffering.
45
GeoffreyA.Moore,InsidetheTornado(NewYork:HarperBusiness,1995)pp.3839.

40

4. Whatistheproductsolution?
a. Whatwilltheproductlooklike?
b. Howmanyconfigurationsormodelswillbesupported?
c. Whatfunctionswilltheproductperform?
d. Howtodowewantusertofeelwhenusingtheproduct?
e. Whatistheoutofboxexperience?
f. Howwillcustomerslearntousetheproduct?
g. Whatisthewarranty?
5. Differentiation
a. Howdoesoursolutiondifferfromthealternatives?
b. Whatisthelevelofdifferentiation?Isit:
Incremental?
Major?
Discontinuous?
c. Isthedifferentiationsignificantintheeyesofthecustomer?
d. Isthedifferentiationsustainable(IP,tradesecret,exclusivedistribution)?
6. WhataretheSolution/Developmentrisks?
7. Whoarethecompetitors?
a. Whatdoesthecompetitivelandscapelooklike?
b. Whatarethelikelycompetitiveresponses?
8. Arethereanyregulatoryorlegalissuestoconsider?
9. Arethereanyotheropenissuesorrisks?

Figure14:AnsoffsProductGrowthMatrix.Thematrixisintermsofyourcompany.Thus,enteringanewmarketmeans

enteringanewmarketforthecompany.Themarketmaybeestablishedwithothercompaniesservingitsneeds.

41

BusinessModel
1. Whatarethekeycustomersegments?
a. Howwilleachsegmentbereached?
b. Howwillthecustomerbemadeawareofthesolution?
c. Doesthecustomerneedtobeeducatedaboutthesolution(importantfornew
markets)?
d. Dodifferentsegmentsrequiredifferentchannelsforpurchaseandsupport?
e. Dodifferentsegmentsrequiredifferentpricingmodels?
f. Dodifferentsegmentsrequiredifferentservicelevels?
2. Howwilltheproductbemonetizedorpriced?
a. Whatistheunitofvaluethatwillbesold?
b. Whatisthetargetpriceperunitofvalue(peruser,perCPU,pergigabit,etc.)?
c. Aretheremultiplestreamsofrevenue?
d. Whatservicescanbesoldalongwiththeproductorviceversa(thinkbeyondjust
warrantyandsupport)?
3. Wherewilltheproductbefound?
a. Wherecantheproductbediscovered?
b. Wherecantheproductbepurchased?
c. Wherecantheproductbeserviced?
4. Serviceexperiencewhatlevelandtypeofservicewillcustomersreceivewhen:
a. Learningabouttheproduct?
b. Purchasingtheproduct?
c. Receivingsupportfortheproduct?
d. Receivingtrainingfortheproduct?
5. Financials
a. Howmanyqualifiedleadstogenerateasale?
b. Whatisthetargetcustomeracquisitioncost?
c. Whatisthetargetlifetimecustomervalue?
d. Whatisthevaluechainforeachchannel?
e. Whatwillyourcoststructurelooklike?

42

PiecingItAllTogether
Applyingtheconceptstoaprojectwouldlooklikethis:

Step1:IdentifytheProduct
MarketFitChallengeType
andsubtypeforyour
product:
ProductMarketFit
Challenge:

Step2:UsingtheProductMarketFit
Triad,explorewhatiswelldefined(i.e.
facts)andwhatisundefined(i.e.
hypothesesthatneedtobetestedor
wherethefirstroundofdiscoveryneeds
tooccur)

Optimize
MarketDriven
TechDriven
Visionary

BusinessModelsubtype:

Businessmodel
defined
Businessmodel
undefined

43

Step3:ApplytheDHTLCycleto
structuretheinquiry.Youraimisto
achievesufficientvalidationofthe
undefinedareasoftheProduct
MarketFitTriad,intheshortest
time,withthefewestresources.The
DHTLcyclewillbeemployedthrough
manyiterationsoflearningduring
theplanning,development,launch
andevolutionoftheproduct.

Becoming
Lean
Practices

Practicesareactivitiesthatcanbetaughtandfollowed.Givenasetofconditions,followingthepractices
shouldpositivelycorrelatewithsuccess.Itisalsoimportanttounderstandthemdeeplyenough,
however,toknowwhentheyshouldandshouldntbefollowed.Thegreatdangeroflistingpracticesin
aguidelikethisisthatreadersmightblindlyfollowthem,believingthatsimplygoingthroughthe
motionswilldeliverthedesiredoutcomeorreward.Thisisthecargocultapproachtomanagement.46
Thinkdeeplyaboutthechangeyouarelookingtorealize,andaskifagivenpracticewillhelpfacilitate
thatchange.Thenaddthepractice,givingtheteamenoughtimetobecomeskilledwithit.Onceitis
working,examineittomakesureitisworkingasplanned.
1. ProductManagementsfunctionistofocusontheproblemsthatneedtobesolved,whilethe
functionofengineeringistothendevelopasolutiontoaddresstheproblemsidentified.Design
happensinthemiddle,andisacollaborativeteameffortaspracticedbythosecompanieswitha
designmaturityleveloffour(Figure15).

Figure15:OlsenDesignMaturityError!Bookmarknotdefined. modeldefinesfourlevels
organizationalcapability

46

Cargocultsemergewhenindustrialandpreindustrialtribalsocietiesinteract.Examplesofthiswereobserved
afterWorldWarIIwhenmilitarybasesclosedonthePacificOceanislands.Tribalmembersbuiltcrudelanding
strips,airtowers,andnonfunctionalradios.Theythenmimickedthebehaviorsofmilitarypersonneltheyhad
observed,inthefalsebeliefthatthiswouldresultinaplanebringingcargototheirisland.

44


2. Understandtheproblemspacetoidentifyunmetneedsandgetfeedbackinthesolutionspace.47
3. Teams
a. Sitwithyourteam.Newproductcreationisacollaborativeeffortthatrequiressustained
interactionbetweenteammembers.Thisfacilitatesknowledgesharing,teamalignment,
andoptimizeddesignandtradeoffdecisions.Sittingwiththeyourteamalsorecognizes
thatthevaluecreatingstepsofnewproductcreationrunhorizontallyintheorganization
crossinggroups,ratherthanoccurringverticallyinasinglefunction,andplacesmanyof
thevaluecreatingplayerstogetherforbetterintegration.
b. Distribution(asindistributedteams)isaconstraint.Workingwithdistributedteams
slowstheprojectdownandrequiresmoreefforttobesuccessful.Relationshipsand
knowledgetransferrequireactivemanagement.Teamsstarttoexhibitdistributiondrag
oncepeoplesitacrossthehallfromoneanother.Itgoesupastheymovetootherfloors,
buildings,timezones,languagesandcultures.Ittakesadditionalinvestmentand
consciousefforttoovercomethisdrag.
c. Prioritizeverbalandfacetofacecommunication.Itiseasiertosendemailand
documents.Butmakeanefforttogetoutofyourseatorvideocalltospeakfacetoface
withteammembersandstakeholders.
d. Dedicateoneormoreteammemberstodesigndontoverlookthiscriticalrole.
4. Onlydetailmarketandproductrequirementsthathaveahighprobabilityofbeingdeveloped.
Thus,donotspecifythewholeproductindetailupfront.Likewise,onlyresearchquestionson
whichyouwilltakeactiononceyouhavetheanswers.
5. ThinkintermsofMinimumMarketableFeatures(MMFs)andsatisfactioncriteria.MMFs
representagranularelementofvaluethatiseasyforthebusinesssidetotrackandunderstand.
ThedevelopmentteammightfurtherbreakMMFsdownintostoriesandtasksastheprobability
thattheMMFwillbedevelopedbecomeshigh.
6. ValidatethistiesinwiththeprincipleofABV(alwaysbevalidating).Validationisacontinual
processthatoccursthroughouttheproductlifecycleuntiltheretirementphase.Thegoalisto
alwayshaveameasureofproductmarketfitandhowthatfitischangingovertime.
a. Performrapidconcepttesting,includingA/Btestingtounderstandwhatworksforthe
customer.Thisalsoshortensdesigndebates.Ratherthandebatewhichdesignorconcept
wouldbebest,testthemboth.
b. EstablishKPIs(keyperformanceindicators)onceinthemarket,establishKPIsthatare
proxiesforfit,suchasconversionrates,retentionrates,usage,etc.
c. Measuresatisfactionandloyaltyonceinthemarket,surveycustomertobaseline
satisfaction,measurechangesandtrackrelativetocompetitors.

47

DanOlsen,http://www.slideshare.net/dan_o/leanproductmanagementforweb20products

45

7.

8.
9.

10.
11.
12.

13.

d. Othertherearemanyotherformsofvalidationsuchasmarketmessagetesting.For
physicalproducts,environmentalandperformancetestingsuchasshock,vibration,
packaging,andUVtestingareallimportantnotjustindevelopmentbutalsoafterlaunch
toensurethatproductqualityisbeingmaintained.
Setbasedconceptdevelopment48incriticalthinkingwearetaughttoevaluateoptions,quickly
narrowtheset,andproceedwiththeoneoptionjudgedbest.Instead,pursuemultiple
alternativesconcurrentlyintheearlystages.Thisaccelerateslearningandallowstheteamto
makeabetterinformeddecisionatalaterdate.Theinitialupfrontworkmaytakelongerbutwill
preventmorereworklater.Thisisalsocountertotheideaofiterativedevelopmentwherea
singledesignisstartedanditeratedupon.
Delaydecisionstothelastresponsiblemoment49thelongeryoucandelayadecision,themore
informationyouwillhave.Keepasmanyoptionsopenforaslongasisresponsible.
Timevalueanalysisunderstandhowthebusinessvalueofprojectsandfeatureschangesover
time.Forexample,doesthevaluedecayquicklywithashortwindowofpremiumpricing(asinthe
semiconductormarket),orisyourmarketfairlyinsensitivetothereleaseofanewproductand
happytocontinuebuyingyourcurrentproduct?
WhenselectingprojectswithhighROI,detailedcostingisanunnecessarydelayandexpense.
Budgetprojectstogettothenextlearning/validationpoint.Youwillthenhavebetter
informationwithwhichtomakeadecision.
ProductManagementProcessRetrospectivesHaveregularreflectionmeetingstoevaluateyour
currentproductmanagementprocesses.FramethediscussionaroundtheLeanProduct
Managementformula(figure1)byaskingwilltheprocesschangeproduceacloserproductmarket
fit,allowustogettomarketfaster,and/ordecreasedcosts.Pullotherdepartmentsintothe
discussionthatareinvolvedinthevaluestream.Discusswhatisworking,whatisnt,wherevalue
isnotflowing,orblockingotherteams,andhowtoimprove.Discusswhatexperimentsyoucan
runtotestifanareaofvalueflowcanbeimprovedandhowprocessesmightneedtovarybased
ontheproductmarketfitchallenge(i.e.TypeI,II,III,orIV).
Portfoliomanagement
Understandhowyourportfolioisdistributedacross:
a. TypeofproblemOptimize(TypeI),MarketDriven(TypeII),TechDriven(TypeIII),and
Visionary(TypeIV)
b. Levelofdifferentiation(i.e.levelofinnovation)
i. Optimize(performanceimprovementsof<100%or2x)

48

TheoriginaltermusedbyToyotaanddescribedbyA.Ward,J.K.Liker,J.J.Christiano,D.K.SobekIIinTheSecond
ToyotaParadox:HowDelayingDecisionsCanMakeBetterCarsFaster,SloanManagementReview,Spring1995,
Vol.36,No.3,p.44issetbasedconcurrentengineering.IpreferthetermSetbasedSoftwaredevelopment
usedbyMaryandTomPoppendieck(Poppendieckp.42).Ihavefurthershortenedthetermtosetbased
development.
49
Ibid,Poppendieck,p.57

46

ii. Major(performanceimprovement>2xbut<10x)
iii. Discontinuous(newidea,performanceimprovements>10xonselectedaxes)
c. Timetomarket
d. Expectedperiodthatdifferentiationwillbemaintainedinthemarketplace
e. Levelofrisk
f. Paybackperiodandshapeofthepaybackcurve
g. Marketdynamics
14. Communitydoyouhaveorcanyoubuildacommunityofusersthatyoucanobserve,receive
ideas,andsolicitfeedbackfrom?Ifyouarefortunateenoughtohavesuchacommunity,consider
assigningafacilitatortomanagethatcommunity.

Engineeringpracticesalsomatter.Themoretheproblem,solution,and/orbusinessmodelare
undefined,thegreaterthebenefitofAgileengineeringpracticessuchasExtremeProgramming(XP)or
ScrumwithXPpracticesofcontinuousintegration,testfirstdevelopment,andincrementaldesign.
Kanbansoftwaredevelopmentisanothergoodoption.Itwillbeimpossiblefortheproduct
managementgrouptoexecutetheDiscover,Hypothesis,Test,andLearnloopwithoutanengineering
teamusingamethodologythatisflexibletochange.

47

SkillsandKnowledgeAreas
Inadditiontoallthetraditionalskillsproductmanagershaveneeded,thereisanewsettomaster.Lean
teamsmoveinlockstep,collaboratingandcontributingateachstage.Rolesdissolveandcompetencies
emerge.Eachteammemberusuallyhasanareainwhichtheyexcel,andforwhichtheyareresponsible.
Thesemaptothetraditionalrole,suchasproductmanagement,userexperience,development,testing;
butthereisfluidityasteammembersareabletocrossover,assisteachotherandcontributetothe
solutiondefinitionanddesignasitmovesfromroughconcepttofinishedproduct.50
1. Charteringfacilitatingthedevelopmentofacharterthatclearlyoutlinesthevision,mission,
objectives,principles,stakeholdersandboundariesoftheproject.Thecharterprovidesdecision
guidancetoallpeopleinvolvedintheproject.
2. Emergentplanningworkingatdifferentlevelsofdetailintheplanandkeepingoptionsopen
toadjusttonewlearning.
3. Quickvalidationlearnhowtovalidatehypothesesquicklyandtakeaction.
4. Continuouscustomercollaborationlearnhowtoincorporatethecustomerthroughoutthe
developmentcycleratherthanatmajorintervaloratendduringthebetatest.
5. Ifyourproducthasauserfacinginterface
a. Prototyping/wireframingtheseskillsareimportantforexploringconceptswiththe
teamandthecustomer.
b. DesignandUXprinciplessoyouareabletorecognizegoodUX(userexperience)and
interactwithyourdesignteamintheareassuchasinformationarchitectureandvisual
design.
6. Analyticsknowhowtouseanalyticstotesthypotheses,guidedecisionmaking,andtovalidate
productchangestoensuretheyhavetheintendedpositiveimpact.
7. Workinginsmallbatcheslearntoworkinsmallbatchesacrossmultiplephasesoftheproduct
developmentcycle.Passsmallbatchesofworkthroughthedevelopmentprocesssoyouand
theteamremainflexibleandresponsive.Splittingoutvalueisasubskillofworkinginsmall
batches.
8. AgiledevelopmentwhetheryourteamisusingScrum,XP,Leanoranothervariant,
understandhowyourdevelopmentteamworks,howtocommunicatemarketrequirements,
howtosupportteammembers,andhowtoleveragethiscapabilityforcompetitiveadvantage.
9. Splittingrequirementslearntotakelargerequirements(epics,sagas,etc.)andsplittheminto
smallerrequirements,minimummarketablefeatures,andstories.

50

Teamsarefindingnewways,suchasLeanUX,toincludeallmembersthroughouttheproductdevelopment
effort.In1986,HirotakaTakeuchiandIkujiroNonakadocumentedthebenefitsofacrossfunctionalteamworking
togetherintheirgroundbreakingHarvardBusinessReviewArticleTheNewNewProductDevelopment
Game[sic.]wheretheydescribedtherugbybasedapproachtoproductdevelopmentwhereintheballispassed
backandforthbetweenteammembers.ThisarticlewasoneoftheinspirationsforScrumsoftwaredevelopment.

48

10. Creativityfacilitationthejoboftheproductmanageristoidentifythecorrectmarketproblem
tosolveandworkwiththeproductteamtodevelopthebestsolutionpossible.Learnhowto
tapintoyourteamscreativeenergyandfacilitatetheproblemsolvingprocess.

Measures
Measuresprovideamechanismtomanageaprocessandunderstandifchangesareimprovingor
worseningasituation.Measures,however,arenotthegoal.Iftheteambelievestheyarebeingjudged
onthemeasure,youwillgetmoreofit.Thiscanleadtogoaldisplacement.Sobewarehowmeasures
areused.Considerdrivingacar:thespeedometerisonemeasurethatthedriverconsults.Thedriver
knowsthehigherthespeedometerreading,theshortertimethetripwilltake.Butifthedriverbecomes
focusedonmaximizingspeedwithoutregardtootherconsiderations,hewillendupwithaspeeding
ticket,orpossiblyexperiencingafierydeath.Botharebadoutcomes.InthecontextofLeanProduct
management,measuresactasinstrumentationthatallowsustoidentifyvariationsandperformthe
criticalproblemsolvingtoimproveourprocesses.Keymeasuresare:
1. Throughputtheamountofvaluecreatedperunittime,whichatthewholesystemlevelwill
leadtofastertimetomarket.
2. Cycletimetherearemanyprocessesinwhichcycletimecanprovideinsight.Ifwethinkabout
theentiresystem,thecompanycanevaluateideatomarketdemand,whichmeasureshow
longittakesthecompanytogofromreceivinganideatoplacingasuccessfulproductinthe
marketplace.Successfulisasubjectivetermandhighlycontextual.Theideaisthatthe
measurementisnotmadeintermsofthetimetakentofirstsale,butintermsofthepointwhen
themanagementteamwouldsaytheproducthasmetthecompanysexpectationfor
performanceinusersandrevenue(thiswillvarydramaticallybyprojecttype).
Withinthatmajorcycleofideatomarketdemand,examinethetimespentininterimstages,
suchasideatoapprovedprojectorMMFtoreleasablecode.Usethisdatatobalancetheflow
ofvalueacrosstheteam.Usinganidealizedexample,imagineittakesoneweektodefinea
feature,oneweektodefinetheuserexperience,andtwoweekstodevelopthefeature.Given
thesetimings,theteamknowsitmustdefineafeatureeveryotherweek,theuserexperience
everyotherweek,anddevelopeveryweektomaintainasmoothflowthroughthesystem.
Onceateamhasabaseline,theeffectsofprocesschangescanbegaugedandtheteamcan
focusonremovingormanagingthebottlenecksinthesystemtokeepvalueflowing.
3. WIPWorkinProgressneedstobemonitoredagainstcycletimes.Themoreparalleltasksthe
teamtakeson,thelongerthecycletimetocompleteeachtask.Theteamneedstofindthe
rightbalancebetweenthroughputandcycletime.AdjustingWIPallowsustocontrolthe
responsivenessofoursystem.
4. Batchsizebatchsizedefinestheincrementofvalueflowingthroughthesystem.Trackingthis

49

5.

6.

7.
8.

9.

10.

metriccanhelptheteamfocusonworkinginsmallerbatches.TheMinimumMarketable
Feature(MMF)isalogicalbatchsizeorlevelofgranularityfortheproductmanagertowork
with.AgileteamswillprefertofurthersplittheMMFintostories.Batchsizecanbemeasured
ascycletimeperMMF,thenumberofstoriesperMMF,orstorypointsperMMF,tounderstand
howbatchsizeimpactstheflowofvaluethroughthesystem.Becausenewproduct
developmentisacreativeprocess,batchsizeswillvaryperMMF,sofurthercategorizationof
eachMMFmightberequired(suchassmall,mediumandlarge).Also,batchsizeisa
roughratherthanaprecisemeasure.Thebatchsizemetricrelatestotheskillofworkingin
smallbatchesandlearningtosplitoutvalue,whichisdescribedintheSkillssectionabove.
Queuestheteamshouldseektoidentifywherecycletimeissignificantlygreaterthanbatch
size,meaningtheitemsatwaitingwithoutbeingworkedon.Iflargequeuesarefound,they
shouldbeaddressed.Youcanalsolookforanyitemthatisagingexcessively,maybebecause
newMMFskeepcomingalongofhigherpriority.Ifanitemisnotbeingmovedforwarditcould
beunderstaffed,blockedandneedingescalation,orjustnotthatimportantinwhichcaseits
priorityshouldbereconsidered.
Ideapipelinemeasurehowmanyideasexistateachstageofdevelopmentduringthe
screeningprocessandthecategorizationofthoseideas.Aretheyincremental,major,or
discontinuous?Aretheideasbalancedacrossthecompanysdifferentproductareasandlines
ofbusiness?
Newproductpipelinelookingatapprovedprojects,howdoesthenewproductpipeline
breakdownbytypeofprojectandareaofbusiness?
Revenueandprofitfromnewproductsrevenueandprofitfromnewproductsareagood
measureofwhetherthecompanyisdeliveringdifferentiatedproducttothemarketplaceand
remainingcompetitive.Duringthemid1990s,forexample,HewlettPackardgeneratedover
80%ofitsrevenuefromproductsintroducedlessthanfiveyearspreviously.51
Resourceallocationmanycompaniesstruggletoremaindisciplinedinpursuinglongterm
needswhenoverwhelmedwithsomanyurgentshorttermrequirements.Committingtohow
R&Ddollarswillbeallocatedbytypeofprojectcanbeeasierthantryingtoevaluateeach
projectindividually.Trackingthisallocationbyprojectsanddollarscanprovideinsightinto
whetherthecompanyisbalancingitsinvestment.Thatmeanstrackingpercentageofspend
allocatedto:
a. Disruptiveproducts
b. Majorimprovementproducts
c. Incrementalproducts
d. Maintenance

OutcomesTheultimatemeasureisthis:didthereleaseortheproductachieveitsstatedgoals

51

DavidPackard,TheHPWay(NewYork:CollinsBusinessEssentials,1995)pp.211212.

50

(sales,profits,users,marketshare,customersatisfaction)intheforecasttimeframe?Although
outcomesarelaggingindicators,closingthefeedbackloopandreflectingonsuccessesand
missesprovidesvaluableinformationforimprovement.
Insomecompanycultures,itiscommontooverstatethebusinesscaseforaprojecttogetit
resourced.Thatpracticeisonlysafewhenactualresultsarenevercomparedtoforecasts.This
leadstosuboptimaldecisionmakingandlossoforganizationallearning.Measuringoutcomes
breedsamorehonestenvironmentformakingdecisions.

PayOffandRisk
Onemightaskwhichtypeofproductmanagementchallengehasthegreatestpayoff.Theanswer
dependsonthelevelofvaluebeingcreatedandthematurityofamarket.Optimizersarenot
condemnedtosmallwins.DellrosetobeaFortune500companybydoinganexceptionaljobofserving
arapidlygrowingmarket.RedBox,atechdrivencompany,becameatrueforceinthematureDVD
rentalmarketbyofferinggreaterconvenienceatalowerpricethanBlockbuster.DellandRedBoxalso
assumedconsiderableriskindevelopingtheirbusinesses,astheirbusinessmodelswereunproven.
Ifyouaregoingtopursueavisionaryproduct,youneedtobelievetheopportunityissubstantialto
assumetheriskthatcomeswiththatmuchuncertainty.Furthermore,visionaryproductsruntheriskof
beingtooearly,asitisveryhardtotimemarketsaccurately.Visionarycompaniesalsotaketheriskthat
thetechnologymaynotperformadequately.
GoCorporation,forexample,wasahighflyingpenBasedtabletcomputingcompanyfoundedin1987.
Thecompanyattractedtoptalent,toppartnersandtopinvestors.Itburnedthroughastaggering$75
millionbeforebeingshutdownsevenyearslater.52
TheAppleNewton,asimilarprojecttocreateahandheld,penbasedcomputer,startedin1987.Prior
tolaunch,theNewtonwasrecastasanewcategoryofproductcalledaPersonalDigitalAssistant
(PDA).53Itfailedinthemarketplace.54Almost20yearslater,Applefinallystruckgoldbyextendingthe
originalNewtonvisionwithitsiPhone(releasedin2007)andiPad(releasedin2010)products.
Visionaryproductsarehighrisk.Failure,however,doesnotalwayshavetocomewiththehighpricetag
associatedwiththeproductsabove.Products,especiallywebbasedproducts,canbebuiltbysmall

52

http://en.wikipedia.org/wiki/GO_Corp.
PalmInc.wasthecompanythatfinallysucceededinthePDAspacebutnotuntil1997withthereleaseofits
secondgenerationproductsthePalmPilotandthePalmPilotProfessional.Bythispointtheywerealreadya
subsidiaryofU.S.Robotics.[http://en.wikipedia.org/wiki/Palm_Inc]
54
http://en.wikipedia.org/wiki/Apple_Newton
53

51

teamsinashortperiodoftime,forrelativelylittlecost.Thisnewmodelofbusinesseconomicsthe
resultofAgilesoftwaredevelopment,opensourcesoftware,andtheInternetsignificantlyreducesthe
riskofvisionaryprojects.

PortfolioPlanningandtheIdeationFunnel
Withmultipleprojectsthathavevaryinglevelsofpotentialimpact,risk,andtimehorizons,acompany
mustmaintainaholisticviewtooptimizeitsreturns.Theportfoliomustbemanagedtoensurethata
balancedsetofbetsisbeingplacedagainstmaintainingthecurrentbusiness,identifyingnewavenuesof
growth,andtheexpectedmaturationofeachproject(Figure16).Further,itiseasytogetboggeddown
focusingonincrementalimprovementsinanattempttoretainexistingcustomers.Incremental
requirementstaketheleastamountofefforttouncoverandvalidate,andarelowrisk.Butacompany
mustcontinuetoinvestinprojectsthatwillcreatealevelofdifferentiationassociatedwithmajorand
discontinuousinnovation.Figure16showsanexampleofaportfoliothatisunderweightinmedium
termmajorimpactprojects.55

Figure16:Exampleportfolioviewofcurrentprojectsbasedondifferentiation,levelof

uncertainty,andtimehorizon

55

Guidanceisnotprovidedonwhatconstitutesashort,medium,orlongtermplanninghorizon.Thesearebased
onindustry,levelofgrowth,andlevelofchangeordisruptionoccurring.

52

Theflowofnewideasthatwillleadtonewprojectsmustalsobemanaged.Asnewideascancome
fromanyone,anywhere,atanytime,companiesneedaprocessforeffectivelycollecting,categorizing,
andscreening.Beingabletoassimilatenewideasfasterthanthecompetitionofferscompetitive
advantage.Themoreeffectiveandefficientacompanyisatcollectingandscreeningidea,themore
likelyitcanexploitanideatofurtherdifferentiateitsproductsinthemarket.
Lastly,certainelementsofuncertaintyarespecifictoacompanyscontextandcapabilities.Referring
backtoAnsoffsProductGrowthmatrix(Figure14),whenacompanyentersanewmarket,theproject
hasmoreuncertaintyandriskthanifthesameprojectwasperformedbyacompanywithanestablished
brandanddistributionchannelinthatmarket.Becauseuncertaintyiscontextual,aprojectmay
representagreatopportunityforonecompanyandapooroneforanother.Everycompanymust
evaluatewhetheranopportunityisagoodfitforit.
Asanexample,Xerox,whosePaloAltoResearchCenter(PARC)inventedthecomputermouse,isoften
criticizedfornotcommercializingthetechnology.ButwasXeroxacompanyfocusedonsellingtothe
enterprisewithmanypromisingprojectsinprogresstherightcompanytodoit?OrwasApplesSteve
Jobs,whosawPARCsinvention,inamuchbetterpositiontofigureout(withthehelpofIDEO)howto
takethisinventionandturnitintoacommerciallyviableproduct?Applesultimateachievementwas
notastraightforwardone:Themousewentfromthreebuttonstoone;thegraphicalinterface(also
fromPARC)thatitinteractedwithwastransformed;themanufacturingcostwasreducedfrom$300to
$15;anditwentfromafinickyprototypetoareliabledevice.56

Implicationstophasegate
Phasegate,astypicallypracticed,isaserialprocesswithlimitedflexibility.Positioning,design,feature
set,businessmodelandrisksarefixedattheearlystagesoftheproject.Phasegateassumesnear
perfectinformationupfront.Asthisguideshows,therearemanyproductmarketfitchallengeswhere
ourunderstandingofthecustomerandneedarefarfromperfectandwillneverbeperfect.
FredWilson,partneratUnionSquareVentures,notedthesestatisticsforhisportfolioabout
transformerscompaniesthatmadeasignificantpivot,comparedtothosewhostucktotheirplan:
Success

Investment Return

Transformed

Stuck to Original Plan

% that Transformed

Outstanding

Greater than 5x

64%

Moderate

1x-5x

60%

Failures

Lost money

20%

Figure17:Startupsthatmadeasignificantchangetotheiroriginalbusinessplansucceededmoreoftenthan
companiesthatstucktotheiroriginalbusinessplan

56

M.Gladwell,CreationMyth,TheNewYorker,May16,2011

53

Mr.Wilsonalsonotesthatuntilacompanyhasfiguredoutitsproductandbusinessmodel,itisessential
tokeeptheburnrate(i.e..expenses)toaminimum.57Leanproductmanagersmustalsodothesame.
Thisiswhyfindingtheproductmarketfitfastwithminimumresourcesissocritical.Companies
fundingmechanismsmustmeterfundingjudiciouslyandnotonlypermitbutencouragedepartures
fromtheoriginalplan.

Implicationsforprojectfunding
Iftheproductmanagementteamisunabletoproduceanyofthreethings:
1. AReliableplan,becausetheproductdefinitionorbusinessmodelisexpectedtoshift
2. Reliablecosts,becausetheproductcannotbefullydefinedupfront
3. Areliablesalesforecast,becausethemarketsizeisunknowable(thecasewithentirelynew
markets)
thenthefundingmechanismmustalsobealtered.Ifitisnotaltered,theteambecomesforcedto
fabricateabusinesscase,whichdoesnotservetheteamsorthebusinesssbestinterests.Theteam
mayalsotakeonmoreresourcesthanappropriategiventheearlystagerisksandlikelihoodthatthe
planwillchange.
Resources,therefore,needtobeagreeduponupfront(i.e.initialteamsizeandbudget),alongwiththe
hypothesestobetestedandtheinterimmetricsthatwilldefinesuccessforthatiteration.For
companieswithannualfundingcycles,thefrequencyoffundingdecisionsneedstoincrease.Some
projectswillgetexpanded,manywillchange,andsomewillgetshutdownduringtheyear.Thereare
similaritiestothephasegateprocessdescribedabove:thecompanystillhascontrolandcheckpoints,
exceptthephasesoverlapandgetreordered.Theproductplanningphasemightactuallyinclude
buildingalightweightversionoftheproductandlaunchingit.Thedatacollectedmaycausetheproduct
tobereconceived,andwillinfluencetheplanning,thebusinessmodel,productpositioning,sales
messaging,andmore.Buildingtheproductandobservingitinthewildisanecessarysteptocomplete
productplanningand,further,tounderstandingiftheproductisonethatthecompanywantstofund
andmaintaininthefuture.Thus,thephasesaredefinedbyasetofinterimobjectivesdesignedto
provethevalidityoftheinitialconcept.Theteammaycyclequicklybetweenanyoneofthemandinany
order(Figure18).Thefocusshiftsfromgatesthatareorderedbytheactivity(e.g.planning,
development,etc.)togatesphasedbylearningobjectives.

57

F.Wilson,WhyEarlyStageVentureInvestmentsFail,www.USV.com,November30,2007
(http://www.usv.com/2007/11/whyearlystage.php)

54

Figure18:Traditionalserialproductlifecycle isorderedbyactivity.Incontrasttheconcurrentproductlifecycle
neededforthemanyproductmarketfitchallengesinwhichtheproblem,solutionorbusinessmodelarenot
fullydefinedisphasedbylearningobjectives.

Thegoalistoacceleratethetimetoproductmarketfit.Soalthoughworkinginthisfashionmayseem
lesscertain,itdoesallowthecompanytomanageriskandleverageemergentlearningand
opportunities.
Foranexistingproductwithafixedproductteam,thecompanyneedstoshiftfromholdingtheteam
accountableforexecutingontheplantoholdingtheteamaccountablefortheoutcome.Thisallows
theteamtoadjusttheplantooptimizetheoutcome.Thealternativeisfortheteamtopursuethe
originalplan,eventhoughtheyknowtheresultswillbesubpar,becausetheyareobligedtoexecute
theplanand,inalllikelihood,beingpersonallyevaluatedintermsofitsperformance.

LeaksversusLaunches
Thisguideemphasizestheimportanceofcollectingrealfeedbackasearlyaspossibleintheprocess,
whichincludesputtingtheproductintothemarketplaceasearlyaspossibleanditeratingquickly.This
isalsoknownasleakingtheproductintothemarket.Therearetimes,however,whenreleasingthe
narrowestsliverofusefulproductdoesnotmakesense.Forexistingbrands,anythingreleasedmustlive
uptothebrandpromise.Iftheproductisnotatasufficientlevelofpolish,thebrandwillbedamaged.
Anotherreasonisifyouexpecttheproducttogarnersignificantpressatitslaunch.Thevalueofalarge
launchisthatpressmentionsandthesubsequentbuzzcreatesawarenessanddemandfortheproduct.
Awellorchestratedlaunchofanewsworthyproductcanbemorecosteffectivethangeneratingan

55

equivalentamountofdemandthroughpaidadvertisingandothersalesandmarketingmediums.
ReferencingtheLeanformula(figure1),ifalauncheventwilllowerthetotalcustomeracquisitioncost
significantly,itmakessensetospendtheadditionaltimeandresourcestodevelopafullerfeatured
productthatappealstoabroadertargetmarketanduseaninviteonlybetatovalidatefit.Inthis
scenario,timetomarketincreases,fitmaydecreaseslightlybylimitingtestingtobetausers,and
developmentcostsincrease.Theseaddedcostsandlostrevenuearemorethanoffsetbytheincreased
salesatlaunchandthelowercustomeracquisitioncosts.

ProcessImprovement
Thisguidefocusesonachievingsustainedcompetitiveadvantagethroughbetterproductmarketfitin
bothproductandbusinessmodeldesign.Thereasonforthisfocusisthatproductmanagersroutinely
influenceboththeseareas.Process,however,canalsoleadtosustainedcompetitiveadvantageand
shouldnotbeoverlooked.Asmentionedinthecasestudies,Dellssuccesswasnotpurelyattributable
toitsdirectbuildtoordersalesmodel,butalsotoitssuperiorsupplychainmanagement.While
productmanagersshouldremainalerttoprocessareasthatcangivetheircompaniesanadvantagein
themarketplace,LeanProductManagementisamethodthatisinthecontroloftheproduct
managementgroup.Byfocusingonoptimizingtheprocessofproductmanagement,companiescan
achievefurtheradvantageagainstthecompetition.Thisisthereasonthatthepracticeofproduct
managementretrospectivesandmeasuresareincludedinLeanProductManagement.

WhereDoServicesFit?
Servicesareatremendoussourceofcompetitiveadvantage.Betterservicecanovercomethechallenge
ofanundifferentiatedproduct.Dellwonovermanycustomersbecauseitallowedthemtoconfigure
theircomputer(memory,disksize,CPU,etc.)fromstandardparts.Zappos(whichwasacquiredby
Amazonin2009)sellsshoesonline.Theshoescanbeprocuredfromotheronlinesourcesandinshoe
stores.ButZappossucceededthroughaneasyreturnpolicyandfanaticalcustomersupportthatkept
customersloyalandreturningformore.
WhenapplyingtheLeanProductManagementframework,aservicecanbeviewedaseitheraproduct
oraspartofthebusinessmodel.Thereissomeleewayonwhereitfitsbest.Asageneralguideline,if
theserviceissold,suchasYouSendItslargefiledeliverysystem,treatitasaproduct.Iftheserviceis
notsold,suchasDellscomputerconfiguratorapplicationonitswebsite,considertheserviceasan
aspectofthebusinessmodel.

56

Conclusion
Successfulcompaniesmusthaveacompetitiveadvantage.MichaelPorterstatedthereareonlytwo
formsofcompetitiveadvantage:lowercostsanddifferentiation.58LeanProductManagementsupports
acompanyseffortstoachievesuchanadvantage.Itdoesthisonthreefronts:
1. Betterproductmarketfitwhichmeansamoredifferentiatedproduct
2. Inlesstimewhichmeansthecompanyenjoysamaximumdifferentiationinthemarketplace
forlongerandaccelerateslearning.
3. Withfewerresourcesbecomingmoreefficientmeanstheproductteamcanmovefasterwith
lesswastedeffortandultimatelylesscost.
Theprocessacompanyshouldfollowwhendevelopinganewproductshouldmatchthetypeproduct
marketfitchallengebeingaddressed.Whenanareaiswelldefined,productmanagersperform
analysis.Whenundefined,theproductmanagercanonlyperformsynthesis.59Thus,companiesshould
notimplementasinglestandardizedprocessormeasuresfordevelopingnewproducts.Newproduct
creationisnotaonesizefitsallmodel.Butconsistentvalues,practices,skillsandmeasurescanassist
teamsinoptimizingthenewproductdevelopmentprocess.Applyingandrefiningtherightprocessto
deliverproductmarketfitinlesstimewithfewerresourcescanprovidealastingcompetitiveadvantage.

AdvancingtheDiscussion
Thisguideisjustthestartofafundamentalshiftinproductmanagementpracticeandeffectiveness.
Weneedproductmanagersfeedbackandexperiencestoacceleratethediscussionandbuilduponthe
bodyofLeanProductManagementknowledge.Clearly,themorethatLeanprinciplesareapplied,the
greaterthebodyofknowledgeanddatathatwillexistfortheproductmanagementcommunitytodraw
onaswedeveloptheideasfurther.Assuch,thisguideisintendedasacalltoactionasmuchasa
handbook:weknowaboutthegreateffectsLeancanhavebuttorealizethemconsistentlyandbuild
onthem,wehavetorolloursleevesupandstartusingthem.
Pleasejointhediscussion.Ifyouhavefeedback,astoryofsuccessorfailure,orotherinsights,please
emailme:greg(at)280group.com.

58
59

MichaelE.Porter,CompetitiveAdvantage(NewYork:TheFreePress,1985),p.11
J.R.Boyd,CreationandDestruction,September1976,p.2.

57

Acknowledgements
IfyoufindtheconceptofLeanProductManagementthoughtprovokingandvaluable,Iamgrateful.Itis
important,however,topointoutthatthiswouldneverhavebeenachievedifitwasnotforthe
significanteffortofmanybrilliantindividualswhosehaveindeliblychangedmyviewoftheworldand
allowedmetoseeconnectionsbetweenmyownproductmanagementexperiences(insuchvaried
areasasmedicaldiagnosticstoscrappyInternetstartups)andthebenefitsofLeanthinking.Itisalways
hardtoproducealistlikethis,andanymisinterpretationormisrepresentationoftheirworkisboth
unintended,andmyresponsibilityalone.
IwouldparticularlyliketothankDanOlsenwhohasindulgedmeinlengthyconversationsonproduct
management.DanhasmadeanumberofkeycontributionsbothtothisguideandthefieldofLean
ProductManagementasawhole.
IwouldalsoliketothankBrianLawleyforhissupportduringthewritingofthisbook,andmycolleagues
at280GroupinparticularPhilBurton,DavidFradinandJimReekesforkeepingmeintellectually
honest.IamthankfulforhavingsuchanamazingsetofcolleagueswithwhomIcansharemypassion
forproductmanagement.
IhavelistedthenamesofotherindividualswhoseworkIhavebuiltupon,orwhohaveinfluencedmy
thinking,inalphabeticalordertoavoidanybias.
JoeArnold,DavidAnderson,JeffBay,KentBeck,StevenBlank,RonaldBrown,MartyCagan,Jane
ClelandHuang,OdenCohen,W.EdwardsDemming,MarkDenne,PascalDennis,MichaelFeldman,Scott
Gilbert,EliyahuGoldratt,BillGross,LukeHohmann,GeoffHuckleberry,RonJeffries,DanielJones,
AvinashKaushik,JoshuaKerievsky,HenrikKniberg,CoreyLadas,DomenicoLapore,LawrenceMiller,Rich
Mironov,GeoffreyMoore,TaiichiOhno,PaulOldfield,AlexanderOsterwalder,JeffPatton,YvesPigneur,
MaryandTomPoppendiecks,EricRies,JeniSall,KenSchwaber,AlanShalloway,DennisStevens,Jeff
Sutherland,ScottWeiss,JimWomack.
Iwouldalsoliketothankmyclients,whohaveopenlysharedtheirchallengeswithme,andthestudents
whohavetakenmyclasses.Youexposemetothelargevarietyofcontextsandconstraintsinwhich
productmanagementispracticedandaskamazingquestions.Itisreallyyouwhohavetaughtme.You
haveprovidedmewiththemotivationtoseekoutbetteranswersandlookbeyondcurrentpractice.
Idalsoliketothanktheindividualswhosufferedthroughearlydraftsofthisbook:RonBrown,Phil
Burton,TomEvans,DavidFradin,BrianLawley,DanOlsen.ThankyoutoBillHiltonformakingthisbook
morereadableandYaseminAkyuzforcoverdesign,layoutandillustrations,andCarrieNaitoforyour
keeneyeinfindingtyposthateveryoneelsemissed.

58

AbouttheAuthor
GregCohenisaSeniorPrincipalConsultantwiththe280Groupanda15year
ProductManagementveteranwithextensiveexperienceandknowledgeof
Agiledevelopment,aCertifiedScrumMaster,andformerPresidentofthe
SiliconValleyProductManagementAssociation.Hehasworkedandconsulted
toventurestartupsandlargecompaniesalikeandhastrainedproduct
managersthroughouttheworldonAgiledevelopment,roadmapping,feature
prioritization,productinnovation,productlifecycleprocess,andproduct
managementassessment.GregistheauthorofthebooksAgileExcellencefor
ProductManagersand42RulesofProductManagementaswellasaspeaker
andfrequentcommentatoronproductmanagementissues.
GregearnedanMBAwithhonorfromBabsonCollegeandaBachelorofScienceinMechanical
EngineeringwithsecondmajorinElectricalEngineeringfromTuftsUniversity.

About280Group
The280Grouphelpscompaniestodeliverproductsthatdelighttheircustomersanddramatically
increasetheirprofitsbyprovidingconsulting,productmanagementprocessassessment,training,
certifications,contractors,templatesandbooks.WinnerofnumerousawardsandfeaturedonCNBCS
WorldBusinessReviewandtheSiliconValleyBusinessReport,since1998the280Groups
methodologieshavebeenusedbytensofthousandsofcompaniesacrosstheworldtoincreasetheir
productmanagementandproductmarketingeffectiveness.

59

OtherBooksbythe280Group

AgileExcellenceforProductManagers
AplainspeakingguideonhowtoworkwithAgiledevelopmentteamstoachieve
phenomenalproductsuccess

42RulesofProductManagement
Acollectionofproductmanagementwisdomfromfortyexpertsfromaroundthe
world.

ThePhenomenalProductManager
Thisbookgoesbeyondthebasicsandteachesyouhowtoworkmoreeffectively
withyourteams,howtoinfluencewhenyouhavenoformalauthority,howtoget
themostimportantworkdoneinlesstimeandhowtomanageandaccelerateyour
career.

ExpertProductManagement
Learnfourofthemostcriticalelementsinensuringproductsuccess,andtakeaway
practicalstrategies,insights,tipsandtechniquestogiveyourproductthebest
possiblechanceforsuccess.

60