Discovery Phase: Step #1 for Creating Innovative Products

Your product is ready. But sales aren’t taking off as you expected.

This is a sign you might have missed the discovery phase and jumped too quickly to the scaling phase.

In such a scenario, the business tried everything:

They built a sales team. They spent their marketing budget in advertising. They hired consultants. They spoke at conferences. They reached out to all their contacts. But still the market doesn’t buy it…

Here’s the common mistake:

Trying to scale too fast… If you’re wrong about what people want, they may try your product once, but don’t count on keeping them as loyal customers.

Innovating is not all about technology.

It’s mostly a matter of uncovering what people want and match this with your solution: the Discovery Phase.

Once you’ve validated that your product fits with what your market really wants, you can start focusing on scaling your marketing strategy and developing new offers: the Scaling Phase. [1]

Different Phases, Different Priorities

Each phase has its own set of challenges. Overcoming these challenges should be your only priority.

Failure occurs when someone believes that a product is in the scaling phase, when it’s still in the discovery phase. [2] Instead of thinking about increasing sales, your priority should be to answer the right discovery questions:

• Do you understand who your customers are, what major problems they are facing, and the results they are looking to achieve?
• What alternative products are they hiring to do the job? How are these alternatives performing? Can you offer something 10x better?
• How will you make the experience of purchasing and using the product remarkable?

You see:

Nothing about increasing sales. Yet.

Discovery Phase: Launch Is Just The Beginning

Launching a new product does not mean switching from a development phase to a selling phase. It is just the beginning the ‘real’ development phase — measuring user behavior, learning from that, improving the product, and repeat.

The discovery phase is all about reducing market risk: Do people want your product enough so they’ll pay for it?

This requires testing your assumption. It’s not a challenge that you solve in an office. It’s a challenge that needs to confront your assumptions with your customers.

Customers will be able to decide whether your product is good or not. You’ll learn so much from real world experiments. It’s the only way to figure out what’s really working and what’s not working.

Keep this in mind:

The discovery phase can be a marathon. It took Nespresso more than 12 years to figure out its product/market fit and build a scalable business model. [3]

“During the discovery phase, burn rate is the enemy. The team should spend as little as possible. It can afford spending time in discovery phase as long as it can limit the cash burn rate. The focus should be on cheap experiments.”

You’re on a mission to do something new? Start focusing on finding the product-market fit. Once you have it, you can begin to think about scaling.

Don’t scale too early. Wait for hitting product/market fit before you start investing in the scaling phase.

Being in the Discovery Phase Means Chasing Product/Marketing Fit

Not surprisingly, most venture capitalists agree on that idea. Marc Andreessen also distinguishes between two phases: before product-market fit and after product/market fit.

Finding product market fit = focusing on the market first

Founders often hold too tightly onto solutions and too loosely onto problems. The problem, i.e. the market, is the real opportunity. Your unique and special v1 idea on how to solve that problem is usually wrong and only through launching, talking to customers, and iterating will you actually find a product that reaches product market fit. Founder genius is most often expressed in choosing the right problem to solve. As Andreessen wrote, “the market pulls product out of the startup”.

— Michael Seibel, Y Combinator Partner

The best way to find product/market fit is through experimentation. You need to focus on two things: building a product and talking to your customers.

For example, staying close to your customer service is the best way to discover where you can improve.

Easier said than done, but here’s what most innovators recommend to find product/market fit:

Choose a market where your prospects have an immediate problem that matters to them. Launch quickly. And focus on improving your value proposition based on the feedback you received from your customers.

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Notes about the Discovery Phase

[1] Big thanks to Terry Opdendyk, a legend of the Silicon Valley venture capital scene. His distinction between the discovery phase and the execution phase inspired me.

The last quote is an extract of an article I wrote in the London Entrepreneurship Review about his checklist for identifying successful startups.

[2] According to Andreessen, “product/market fit means being in a good market with a product that can satisfy that market.”

Sounds easy. From my experience hitting and knowing when you’ve hit product/market fit is not that easy. That’s what Brad Feld nicely summarised in this article, titled The Illusion of Product/Market Fit for SaaS Companies.

The concept of product/market fit helps measure when you should start scaling. But keep in mind that this is the theory.

In reality, business is an art… As Ben Horowitz highlights talking of product/market fit:

“Your story will almost certainly not be that clean. You might achieve partial product market fit at the same time as a scary competitor, you might not be sure that you have product market fit, you might lose product market fit. When one or more things happen, no pattern matching will save you.”

[3] VCs talk a lot about this topic because they are constantly exposed to attempt to innovate. That said, the same framework applies to larger companies. It happened to Honda in the late 1950s. The company tried to break into the US market by selling large motorbikes. They noticed during the discovery phase that it would not work. The market was already saturated. Then they serendipitously adapted their strategy to focus on selling lightweight 50-cc Super Cub, which was a real innovation for the US market.

Thanks to Kirsten Brown for reading drafts of this.