Product Iterations in Early Days
Once a new company has a working product on the market, its life becomes a sequence of small iterations. Improve this, measure results. Improve that, measure results. There are three primary areas of focus: customer acquisition, customer value, and monetization. The goal of these iterations is to either (1) build an attractive unit economics, or (2) recognize a product crisis and change the course of the company. Ideally, you should complete this stage in one to four months.
The product crisis very likely. In fact, it is more likely to create a great winning product as your second, third or fourth attempt, than to get it right from the very beginning. Be completely honest with yourself and look for better business opportunities.
Action steps
- Plan your next product iteration.
- Implement the next iteration and measure its results.
What to work on
More value. Slowly add new features, improve performance, provide better customer service. React to customer complaint and fix mistakes.
Better customer acquisition. Improve landing page, a product tour and selling materials. Integrate with new sales channels. Satisfy requirements from a particular customer group (e.g. adding vegetarian options in a restaurant). Add more social proof: customer testimonials, press, industry recognition, independent reviews.
Better monetization. Increase conversion from free to paid. Move users from basic offering to advanced version. Encourage more metered usage. Grow average check.
The basics of product management
Customer scenarios. Have a place to write down the key customer scenarios you plan to deliver. When new ideas are coming, try to record them as changes in customer scenarios, not just as a feature requests.
Be very slow on new features. Kill features that turned out to be secondary. Focus on a few big features. Spend more time on improving core functionality than on adding new one.
Split your work into iterations or sprints. Every time focus on a few key improvements. If you run a multi-sided service or marketplace, focus every iteration only on one side. A typical iteration should take from two days to three weeks.
Have a prioritized stack of possible new features. New ideas come all the time. Some come to project leader, some to frontline employees, some come from customers. Resist the urge to implement everything. Instead, just record them into a document called feature stack. From time to time sort out this list by priority (impact + ease of implementation) to your business. When it is time to define the next iteration, look at the top of your current feature stack.
Identify key metrics related to your current iteration. It should be some measure of customer acquisition, product value, or monetization. Have a projection for metric improvement at the start of the iteration. Then, compare your results to your objectives.
Product review
Every month, review your product success. Are you happy with metrics on customer acquisition, created customer value and monetization? Is it realistic to reach your goals on engagement and revenue on your current runway? Do you have a fear of failure at this moment? Get an independent opinion from outside.
If everything is great, focus on unit economics. How much value do you create for every customer? How much does it cost to bring a new customer? How much do your earn on every client? How large is the total addressable market? Once there are good answers for these questions, move your focus from product improvements to growth.
If current customers are very happy, but the revenue is slow to grow, focus on customer acquisition. What product changes make it easier for new customers to discover and start using your service? Add more social proof (customer results, reviews) to your product. Ask your existing customers, whom can they recommend you to?
If your initial customers are not impressed, declare a state of emergency for your business. Are your current customers ready to enthusiastically recommend your service to their friends? If not, you have a crisis. Adding new features, or promoting better will not help.
Handling a product crisis
Be honest with yourself. The earlier you realize that initial customers are not impressed the better. It is very normal for the first offering to fail. But not recognizing it can be lethal.
Consider changing your initial customer group. Perhaps, you have a valuable offering but invited wrong people to try it first. Who can be more interested to try you product? Who has the biggest pain and desperate for a better solution? You can spend a week or two introducing your product to new pilot customers.
Consider refocusing on your most valuable feature. What is a single most useful part of your current product? Can you build a new product that does only this thing?
Ludicorp was an online game company in Vancouver, Canada. Its Game Neverending had a photo-sharing chat functionality. The team realized that this single feature has more demand than the game itself. A few months later Ludocorp has built image sharing site Flickr.com and sold it to Yahoo! for 35 million dollars.
Look for related problems. Ask your initial customers to complete the sentence “We do not need your current product, but it would be really great if you can do … for us.” If this newfound opportunity looks promising, consider to refocus your company on it.
Consider going back to opportunity search. It can happen that your initial customers are not impressed, no single feature is particularly liked, and there is no attractive adjacent opportunities. This is a good point to go back and search for new business opportunities. You are better entrepreneur now, so use your talents to build something people really want.
Do not lower your standard for business opportunities. If you are refocusing to a different opportunity, it should be more attractive than your first one. Run a complete “idea checklist” process for your new direction.
This article is a part of Earlydays, an open guide for first-time entrepreneurs.
Written by Yury Lifshits — yury@yury.name — @yurylifshits
