Choosing the Right Product Opportunities
Every product manager, entrepreneur, and company executive faces the challenge of choosing the right product opportunities. You come across potential opportunities all the time. Which ones should you lead, advocate for, request funding for (either venture or engineering), really get behind? Which product opportunities will you personally back with your time, effort, and reputation?
That’s really the way you should be thinking about it. Your time is limited. Your company’s resources are limited. You can’t afford to chase after product ideas when there is no real opportunity. Too many PMs and entrepreneurs get a little too taken with their own ideas, or get enamored with the idea of doing their own startup. But they don’t do enough to convince themselves that there’s a real opportunity behind the product idea that they are pursuing.
Why is picking the right product opportunities important?
Several successful entrepreneurs and investors have written about the importance of picking the right product opportunities.
As Marc Andreesen famously wrote in his post that introduced the concept of product-market fit:
“In a great market — a market with lots of real potential customers — the market pulls product out of the startup. The market needs to be fulfilled and the market will be fulfilled, by the first viable product that comes along. The product doesn’t need to be great; it just has to basically work. And, the market doesn’t care how good the team is, as long as the team can produce that viable product.
“Conversely, in a terrible market, you can have the best product in the world and an absolutely killer team, and it doesn’t matter — you’re going to fail. You’ll break your pick for years trying to find customers who don’t exist for your marvelous product, and your wonderful team will eventually get demoralized and quit, and your startup will die.”
Sam Altman also advised in a talk he gave at Stanford: “You can change everything in your startup except the market. So spend a lot of time up front to make sure you’ve thought through your market.”
How should you approach new product opportunities?
It’s critical that PMs and entrepreneurs approach new product opportunities with a critical-thinking mindset. You are about to embark on a months, quarters, or even years-long journey with a new product idea that you spearhead. Before you throw in your lot with this new product idea, you should really convince yourself that it’s worth it, before you try to convince others. Be objective, be skeptical, and seek the truth. Don’t try to talk yourself into thinking that an opportunity exists when it doesn’t.
Paul Graham has written about the concept of “Formidable Founders” in a post on “How to Convince Investors.” He wrote:
“Convince yourself that your startup is worth investing in, and then when you explain this to investors they’ll believe you. And by convince yourself, I don’t mean play mind games with yourself to boost your confidence. I mean truly evaluate whether your startup is worth investing in. If it isn’t, don’t try to raise money. But if it is, you’ll be telling the truth when you tell investors it’s worth investing in, and they’ll sense that. You don’t have to be a smooth presenter if you understand something well and tell the truth about it.”
Raad Mobrem, who founded Lettuce and sold it to Intuit, wrote about validating your product opportunity with potential customers. He had a strong point of view on how you should validate your product idea with them:
“ At this point you should share your idea with them, but ask them to tell you why it sucks! The main reason to do this is because you want set the precedent that they don’t have to be positive but should instead find the gaps or issues with your proposed solution.
“The worst thing you can do is ask for their opinion with a loaded question (i.e. Do you like my idea for a to-do list app?) because this only guides them to give you words of encouragement — and this doesn’t help you in building a better product at all.”
Reid Hoffman, in a talk that he recently gave at a Greylock event, recounted what he did when he first came up with the idea for LinkedIn:
“I went around to all of my smart friends and asked, ‘What’s wrong with this idea? Why won’t this work?’”
He pressure tested the product idea for LinkedIn by asking people to tell him why it won’t work. He incorporated their feedback into his thinking about the opportunity, refining the product and his approach. In the end, he could have decided to pass — but he went for it, and his product idea was so much stronger as a result.
How do you actually pick the right product opportunities?
Ok, so we’ve discussed why it’s important to pick the right product opportunities. And how you should approach new product opportunities with a critical thinking mindset — a fair dose of objectivity and even some skepticism. So how do you actually pick the right opportunities?
You have to do customer research. Nothing else will substitute for that.
No amount of discussions with sales, third-party analyst research, or internal brainstorming will substitute for real customer feedback. Steve Blank has said, “There are no facts inside of your building, so get outside.”
I’m a big believer in Steve Blank’s hypothesis-driven approach to customer development. Basically, you should develop your hypotheses around the product opportunity, and then test those hypotheses directly with customers.
Here are the key hypotheses to test, ranked in order of importance:
- Customer need
- Differentiation / competition
- Value / pricing
Customer need: First, you want to validate that there’s a real pain point that you are solving for. You want to build a pain killer, not a vitamin. There’s some urgency for a customer to buy a pain killer. There’s no urgency for them to buy a vitamin. If there’s no customer need, everything else falls apart — and there’s no product opportunity. This is often the place that most new product opportunities and startup ideas fail — they are not addressing a real, urgent customer pain point.
Solution: Next, you want to test whether your hypothesized solution will solve the customer’s problem. You should try to understand how much better your solution is than the customer’s alternatives — ideally, you want your solution to be profoundly better. Not incrementally better. You can also test your hypothesis about what the core features of your product are. What are the 3 key attributes that define the fundamental essence of your product? As Paul Bucheit (one of the creators of Gmail wrote):
By focusing on only a few core features in the first version, you are forced to find the true essence and value of the product. If your product needs “everything” in order to be good, then it’s probably not very innovative (though it might be a nice upgrade to an existing product). Put another way, if your product is great, it doesn’t need to be good.
Differentiation / competition: You should test how differentiated your solution will be perceived by your customers. Ideally, you want your customers to perceive your solution as being radically different than your competitors. You should have some hypotheses about what features are valuable to your customer (from both the customer need and solution hypotheses), as well as what is unique. Based on that, you can include a mix of Table Stakes and Differentiator features in your core product. Stay out of the lower half of the chart below (low customer value).
Value / pricing: Finally, you should develop and test some hypotheses about the perceived value and the willingness to pay. How will the customer evaluate success? How much does the customer pay for alternatives? What will the customer pay for your proposed solution? What could you do to increase value and willingness to pay?
Once you have these hypotheses, you can go out and have very focused conversations with customers to test them. The point of the hypothesis testing is two-fold: (1) convince yourself that it’s worth pursuing, and (2) refine your thinking based on what you learn.
If you don’t believe that there’s a real customer need, or that your solution would solve their problem, or that you would be differentiated enough, or that they would be willing to pay enough — then it’s not worth pursuing. If the opportunity passes all of these tests, then you’re probably onto something. But be intellectually honest with yourself.
Choosing the right product opportunities is an important skill that any product manager, startup founder, or high-tech company leader needs to know. In this post, we have discussed why picking the right product opportunities is important — because if you make the wrong decision, you are doomed to never achieve product-market fit. We’ve also discussed the critical thinking mindset — objectivity bordering on skepticism — that you should have when you consider a new product opportunity. And finally, we have discussed the hypothesis-driven approach to customer research that is the only way to maximize your chances of choosing the right product opportunities.
One criticism I hear about this process is: “Doesn’t this just slow you down? I thought startups and great tech companies are supposed to be nimble and move fast. If you spend all this time up front analyzing a product opportunity, aren’t you just wasting precious time between the point at which you get an idea to the point of when you start development?”
Regarding this criticism, I’m reminded of the Latin saying used by Roman emperor Augustus, “Festina lente,” which means, “Make haste, slowly.” The meaning of this saying is, “activities should be performed with a proper balance of urgency and diligence. If tasks are overly rushed, mistakes are made and good long-term results are not achieved.”
That’s exactly the point of why I believe it’s important to do your diligence about a new potential opportunity before diving in. Spend the time up front to develop your hypotheses, test them with real customers, and objectively analyze the results. If you do this, you’re more likely to choose the right product opportunities. You will avoid the opportunities that have no chance of success. For those that have potential, you will uncover the core essence of the value to your customer, and avoid over-building or including the wrong features in your product. Once you have convinced yourself that this is a worthwhile opportunity, then dive in and begin building the product with urgency.
And of course, you should always strive to iteratively build the product with successive minimum viable product (MVP) milestones, each designed to address the key risks for the product’s success. After all, customer interviews and incredibly important, but even they are not a perfect predictor of product success. There’s sometimes a difference between what a customer says, and what she will do. Therefore, iteratively build MVPs of your product, and with each iteration, get real customers to use it. But you’ve got to start with customer research up front to make sure you’re even in the ballpark of a real product opportunity. If you’re directionally right, then the MVP process will help you refine your product to get to product-market fit most quickly.
The next time you come across a potential product opportunity, remind yourself why it’s important to pick the right ones, get yourself into the right critical thinking mindset, and then do some customer research. I promise that you are more likely to succeed if you do.
If you enjoyed this article, please click “recommend” and check out additional posts in my publication PM Insights: Lessons from Being a Product Manager.