How to Conduct a Product Opportunity Assessment
Originally posted on The PM Vision (now defunct). This version has been edited for clarity.
Product teams exist to assess opportunity and to capitalize.
Product managers are tasked with finding market problems that are pervasive within a certain target market, which people are willing to pay to remedy. Then, once found, to guide the development of a profitable solution to those problems.*
Market problems can be solved with new service offerings; new features; new partnerships; new pricing and packaging; new products…
New product development is expensive. Business must prioritize and invest only in the best opportunities.
In traditional corporate environments, the business case serves to document the context, rationale and revenue potential of a business opportunity. Established businesses often won’t invest unless the case “proves” a profit margin over a certain threshold.
Over time, it’s been shown that this approach is prone to failure. The business case / snapshot of the world is out of date as soon as it’s “completed.” entrenches the expected solution such that pivoting based on market response becomes difficult. Because of this, many teams are now moving to a more concise opportunity assessment.
Three Approaches to Product Opportunity Assessment
The more significant the investment needed to develop a proposed solution, the more detailed the assessment should be.
In order to invest only in the most promising opportunities, it pays to start working through the sequence of assessment techniques until you’re comfortable with your decision. The bigger the opportunity, the more thorough the technique, generally speaking:
- Scoring (most applicable for features in an existing product)
- Opportunity Assessment (big features or small products)
- Prototype / MVP (full size products)
The quickest assessment technique is to evaluate your idea according to a weighted scoring formula built into an easy-to-access spreadsheet. This tactic allows ideas to be quickly ranked against each other.
This is often enough when ranking enhancements to existing products.
My friend Jason Brett has shared the “60 Second Business Case,” which provides an out-of-the-box implementation of this technique:
Jason’s approach maps to an existing customer base and product in market, supporting operational necessities as well as thresholds for scoring projected revenue impact. The headings can be modified to apply the evaluation technique to the needs of any product organization.
Scoring opportunities allows a team to quickly focus on ideas worth pursuing, and to filter the rest out.
2) Opportunity Assessment
For ideas that past the first screen, and for those ideas suggesting larger features or a new product altogether, a slightly more involved opportunity assessment may be warranted. Marty Cagan suggests that answers to the following ten questions should comprise the assessment of a product opportunity:
- Exactly what problem will this solve? (value proposition)
- For whom do we solve that problem? (target market) / (user and buyer personas)
- How big is the opportunity? (market size)
- What alternatives are out there? (competitive landscape)
- Why are we best suited to pursue this? (our differentiator) / (Do we need to partner?)
- Why now? (market window)
- How will we get this product to market? (go-to-market strategy)
- How will we measure success/make money from this product? (metrics/revenue strategy)
- What factors are critical to success? (solution requirements)
- Given the above, what’s the recommendation? (go or no-go)
I advocate completing a lean canvas as part of assessing the opportunity as well. The important elements to include here are:
Solution – To elaborate on solution requirements, the Lean Product Canvas includes a short description of the solution itself to keep everyone on the same page.
Unique Value Proposition — why is this idea capable of winning in the market?
In some cases, to clearly communicate the product idea being considered, a rough sketch of the solution is useful. A visual illustration of the product concept inwireframes, along with a list of key workflows, can ensure meeting of the minds. This is particularly important when this assessment is to be shared within a team.
3) Prototype / MVP
The lean startup movement advocates market testing a proposed product idea at a very early stage, learning from that market testing, and then adapting based on the learnings. For product concepts that address unsolved problems in new markets, this is another tangible step on the road toward commercialization.
Some questions – such as how much someone will pay, and whether a product workflow matches actual business process – may not be truly answerable until a potential customer can evaluate a prototype in their own hands. That prototype may be a minimum viable product.
Use the opportunity assessment to try to prove that a given market problem does NOT provide a viable opportunity. There could be many reasons, including:
- Perhaps there isn’t a big enough market segment
- Perhaps the opportunity doesn’t offer enough revenue potential
- Perhaps the opportunity does not line up with your organization’s strengths/strategy.
In any case, it may not make sense to build an MVP; or it may make sense to revise the proposal (pivot) before building anything. If, instead, your results suggest there may be something there, you have one or more hypotheses to test with an MVP!
Conclusion / Rule of Thumb
Do as much due diligence as is appropriate for the investment you’re considering. A quick check of the wind direction might be enough to validate your decision to prioritize features of a product already in market. For a new product opportunity, you’ll want to conduct a more thorough opportunity assessment, in case there are reasons you shouldn’t go forward to the prototype / MVP stage….that will allow you to invest instead in a more promising idea.
*most product managers are incented to focus on the latter part, but that’s a separate topic.
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