The Maximum Value Proposition - MarketFit · Minimum Viable Product Starts with your idea Problem...

How to create winning products with the new MVP

The Maximum Value Proposition

MARKETFIT

Alan A lber t

© 2015 Alan Albert All rights reserved

Agenda

Intro State of the Art

Customer Values Maximum Value Proposition

Alan Albert

marketfit.com [email protected]

@A_Albert


Strategic Consulting for Measurable Growth

MARKETFIT

I’m the president of MarketFit, a strategic consultancy that helps companies grow.

http://marketfit.com

mailto:[email protected]

ProductMarketing

DevelopmentCustomer ServiceQuality Assurance

StrategyCEO

B2B Products & ServicesB2C Products & Services

StartupsBootstrapped

Venture-fundedSMB

Fortune 500

Cognitive PsychologyComputer Science

$1B

AdvisorInvestorDirectorChair

Databases Personal productivity Business intelligence

E-commerce Financial services Social networking

Education Knowledge Management Home Grocery Shopping

Online security Real estate software

Video software Scheduling software

Process Control Publishing

Brick & mortar retail Personal computing Enterprise software

SaaS / Cloud computing Industrial technology

Software development UI / UX

Information architecture Input / output devices

Mobile devices Corporate strategy

Corporate partnerships Marketing automation Online marketplaces Consulting services

I’ve been fortunate to work in a wide range of businesses, in a wide range of roles. I’ve led the creation of products that have generated cumulative revenue of over $1B. I’m sharing my background to provide context for the ideas I’m going to talk about.

C O N T E N T

ADVISORYCONTROVERSIAL IDEAS

If anyone is uncomfortable hearing controversial ideas, now would be a good time to leave the room. :) In this session, I’m going to say some things that call into question some current best practices in Product Management.

Credit: Eric Ries

Quick summary of Lean approach.

IDEAS

BUILD

PRODUCT

MEASURE

DATA

LEARN

Credit: Eric Ries

Quick summary of Lean approach.

Start with your ideaBuild Minimum Viable Product (MVP)

Iterate to validate your ideaFail faster

Core principles of Lean that may not always lead to the best results. I’ll explain why.

Local MaximumInitial Idea

Success

Start with your idea?

Iterating to improve your initial idea may lead to a local maximum that’s insufficient to reach the product-market fit required for market success. Your initial idea is likely to constrain your future iterations unnecessarily.

CuteFriendlySoft FurFetchPotty Trained

$20

Do you like my puppy? Most market research will indicate that iterating to add all these features will make an even better puppy. But it won’t help me sell my puppy to people who don’t want a dog, or who don’t want a pet of any type.

Start with your idea Build Minimum Viable Product (MVP)

Iterate to validate your idea Fail faster



Starting with your idea or solution is often the wrong place to start.

IDEAS

BUILD

PRODUCT

MEASURE

DATA

LEARN

This is the expensive part This is the important part

Eric Ries accurately states that learning is the important part of the Lean cycle. And that building is the most expensive part. So why start with the most expensive part?

Why build before you measure?

Is there any other industry where you build before you measure? When does this ever make sense? Why do it when introducing a new product, the riskiest time of all?

What if they had started with minimum?

Do all products benefit from the Minimum Viable Product approach? Are there some products that succeed precisely because they’re not minimal?





Building before measuring seems wasteful at best.A Minimum Product may not be the right thing for the target market, and may not be Viable as a result.

The first principle is that you must not fool yourself— and you are the easiest person to fool.

– Richard P. Feynman

As you iterate to make your idea better and better, you work hard to gather evidence that shows your idea is valid. This leads to confirmation bias. You see only confirming info, and ignore other data. You can’t “validate” an idea. If Lean were truly scientific, you’d work to disprove your hypothesis, not validate it.





Validating your idea is the wrong goal. Confirmation bias leads to self-delusion. Iteration in advance of finding a market is wasteful.

Chasm

Credit: Geoffrey Moore

Fail hereValidate here

Iterate fast here

If you validate your initial idea with Geoffrey Moore’s “innovators”, then iterate with “early adopters” to refine your idea, you’re primed to fall into the Chasm. The “early majority” has different values, and may want a different product entirely.

>80% Fail

Prior to the Lean approach, over 80% of new products and new ventures failed. Lean companies can now “fail faster,” saving money via fast, cheap iterations. Yet even with Lean, the failure rate is now… still over 80%.





Is the goal really to “fail faster”?If Lean is the answer, then why isn’t the success rate much higher?

Simon Sinek suggests an alternative approach, that leads to some different implications for growing a business.

“People don’t buy what you do; people buy why you do it.”

–Simon Sinekwhy

Simon Sinek suggests an alternative approach, that leads to some different implications for growing a business.

WHATHOW

WHY

Lean starts with your idea — the “what” — and then works towards validating the idea, with the goal of eventually figuring out why someone might buy it. What if we took the opposite approach?

What makes a product Disruptive, and not just a crazy idea nobody wants? Disruptive products appeal to different customer values. As a result, the Functionality required to satisfy those values changes. Examples: Landlines->Cellphones. Film Cameras->Digital Cameras. Point & Shoot Cameras, MP3 Players->Smartphones. Retail->Amazon.com. Hotels->AirBNB. Taxis->Uber. In all cases, the definition of what is valued changes.

Func

tiona

lityTime

Market Need

Sustaining Innovation

Disruptive Innovation

What makes a product Disruptive, and not just a crazy idea nobody wants? Disruptive products appeal to different customer values. As a result, the Functionality required to satisfy those values changes. Examples: Landlines->Cellphones. Film Cameras->Digital Cameras. Point & Shoot Cameras, MP3 Players->Smartphones. Retail->Amazon.com. Hotels->AirBNB. Taxis->Uber. In all cases, the definition of what is valued changes.

Customer Values

Introducing Customer Values as what’s most important.

By values, I don’t mean the kind that appear on corporate mission statements.

Values motivations

goals concerns emotions

what people care about the “why” that makes them buy

Values is a catch-all term, used to describe the “why” that makes people buy. They can be positive: motivations and goals. Or negative: concerns or worries. They may relate to the product category, but they are not feature preferences.

PRODUCT

VALUES

FEATURES

BENEFITS

Products have features. Features have benefits. Benefits appeal to specific values. Conversely:Customers have values, which lead them to seek specific benefits. Those benefits come from features, that are in a particular product. Customer values are fundamental.

NO Optical Drive NO Ethernet Port NO Media Card Slot NO replacable battery Single USB Slowest

In 2008, if a market researcher asked you if you wanted a laptop that lacked all these standard features, would you want it? What if it cost 80% more than a standard laptop? Who would buy such a thing?

80%In 2008, if a market researcher asked you if you wanted a laptop that lacked all these standard features, would you want it? What if it cost 80% more than a standard laptop? Who would buy such a thing?

Lots of people would buy it. The Macbook Air lacked all of these features, cost 80% more, and became the best-selling laptop of all time. Why? It appealed to customers with a different set of values: lightweight portability and long battery life, more than MHz and MB.

Values are fundamental

ideasproduct or servicemarket or segment

positioning and message

Why Values?

Values are discoverable and measurable

Why are customer values important? You can change your idea, product, market, or messaging. Values are more fundamental.Values are measurable and actionable. Values can be emotionally triggered. Values determine a customer’s reaction to your idea.

x

Affordable

x

Fuel Efficient

x

Nostalgic

x

Modern Technology

Example #1: VW Beetle appeals to a different set of values than an Audi R8. Both might have started from the same Minimum Viable Product, but they satisfy totally separate market segments.

x

Affordable

x

Fuel Efficient

x

Nostalgic

x

Modern Technology

x

High Performance

x

Luxury

x

Superior Technology

x

Driving Experience

Example #1: VW Beetle appeals to a different set of values than an Audi R8. Both might have started from the same Minimum Viable Product, but they satisfy totally separate market segments.

precisely what you need in places you want to go

for business or playbest available rate guarantee

comfortably familiar roomsfree Wi-Fi

convenient diningalways included

Example #2: Delta hotels appeal to people who value a consistent experience wherever they go. AirBNB appeals to those seeking a different experience, but still want the safety of a more traditional hotel. By addressing customer values/concerns, AirBNB defined a new market.

precisely what you need in places you want to go

for business or playbest available rate guarantee

comfortably familiar roomsfree Wi-Fi

convenient diningalways included

explore the worlddiscover local experiences

sense of belongingcommunity and connections

sharingmore affordable

trust & safetysupport neighborhood businesses

increase local tax revenue

unique accommodations

Example #2: Delta hotels appeal to people who value a consistent experience wherever they go. AirBNB appeals to those seeking a different experience, but still want the safety of a more traditional hotel. By addressing customer values/concerns, AirBNB defined a new market.

Market SegmentGeographic

Demographic Behavioural

Psychographic Occasional By Benefits

Cultural

Traditional definitions of Market Segment appear to be proxies for what I think may be a better definition: Customers who share the same set of strongly held values about a type of product or service.

Market SegmentShares the same set of strongly held values

about a product or service

Traditional definitions of Market Segment appear to be proxies for what I think may be a better definition: Customers who share the same set of strongly held values about a type of product or service.

Maximum Value PropositionThe New

The “why” that makes them buy

The Maximum Value Proposition is the set of customer values that most strongly drives the buying decisions for your target market. It’s the “why” that makes them buy.

Maximum Value Proposition

When your product is a clear expression of a set of customer values, your messaging clearly conveys these same values, and these same values are strongly held by your target market, then you have product-market fit.

PRODUCT MARKET

MESSAGE

PRODUCT -MARKET

FIT



PRODUCT MARKET

MESSAGE

PRODUCT -MARKET

FIT


“Product-market fit is the only thing that matters.”–Marc Andreessen


Validating the Minimum Viable Product

Starts with your ideaProblem hypothesis testingSolution hypothesis testingGoal is to validate your ideaBuild minimal viable product

Contrasting the Minimum Viable Product with the Maximum Value Proposition.

Validating the Minimum Viable Product

Starts with your ideaProblem hypothesis testingSolution hypothesis testingGoal is to validate your ideaBuild minimal viable product

Discovering the Maximum Value Proposition

Starts with the customerValue discovery

Value measurementGoal is to gain empathyDiscover maximum value

Contrasting the Minimum Viable Product with the Maximum Value Proposition.

Value Discovery

Problem Discovery

is not

Problem Hypothesis TestingSolution Hypothesis Testing

Clarifying what Value Discovery is not.

IDEAS

BUILD

PRODUCT

MEASURE

DATA

LEARN

The Lean cycle still has plenty to offer. It’s just starting in the wrong place. It’s not about your idea. It’s about your customers, and what they value. Start by measuring their values.

IDEAS

BUILD

PRODUCT

MEASURE

DATA

LEARN

Start here

The Lean cycle still has plenty to offer. It’s just starting in the wrong place. It’s not about your idea. It’s about your customers, and what they value. Start by measuring their values.

Credit: Strategyzer

Value Proposition Design provides a good framework for understanding and “validating” a value proposition. But like the Lean method itself, it starts with the product, rather than with the customer. I suggest starting with the customer will yield far better results.

Gain Creator

Pain Reliever

Product Service

Job To Be Done

Gains

Pains

Credit: Strategyzer


Gain Creator

Pain Reliever

Product Service

Job To Be Done

Gains

Pains

x

xCredit: Strategyzer


Value Discovery Research

To best understand customer values, you can’t just ask people to tell you their values — you’ll get misinformation at best. So I’ve developed a method to identify and quantify customer values, called Value Discovery. Here’s a quick summary of how it works.

Value Discovery ResearchQuick, cost-effective, fun

Small sample sizeQualitative and quantitative

Start high levelDrill down on top values Avoid focus on features

Learn, don’t proveNo sales

Seek empathy

To best understand customer values, you can’t just ask people to tell you their values — you’ll get misinformation at best. So I’ve developed a method to identify and quantify customer values, called Value Discovery. Here’s a quick summary of how it works.

Why Empathy?

do more than solve problems

create products that intimately connect with your customers’ identity

Why is empathy so important? Why is empathy the goal of Value Discovery research?

Market Problems

Win/Loss Analysis

Distinctive CompetenceCompetitive Landscape

Technology Assessment

Market DefinitionDistribution Strategy

Product Portfolio

Product Roadmap

Business PlanPricing

Build vs Buy

PartnersProfitability

Innovation

Positioning

Buying Process

Buyer Personas

User Personas

Requirements

User Scenarios

Status Dashboard

Marketing Plan

User EngagementUser RetentionProgram Effectiveness

Launch Strategy

Leadership

Lead Generation

ReferralsReferences

Sales Process

Collateral

Sales Tools

Channel Training

Presentations

Demos

Calls

EventsSupport

Staffing

OVERLOAD

At this point, you’re probably thinking: Oh great, on top of everything else a product manager has to do, here’s another chunk of work. You’ve already got a lot on your plate. Who needs yet another research project?

Fortunately, the Maximum Value Proposition simplifies things. You can do less, and achieve more, if you start by understanding customer values. And you can apply this knowledge to all aspects of product management. Here are some examples.

Maximum Value Propositionfor

New product creationProduct positioning

BrandingRoad mapping

Market segmentationProduct line extensions

Pricing

Fortunately, the Maximum Value Proposition simplifies things. You can do less, and achieve more, if you start by understanding customer values. And you can apply this knowledge to all aspects of product management. Here are some examples.

Case Studies

Real Estate Financial Services English Language Centers

#1: Real EstateStartup. Focus was on Product Definition. MarketFit provided the training - they did the research. 2 weeks.#2: Multi-Campus International English Language CollegeFocus was on Pricing. MarketFit did the research. 3 weeks.

Real Estate Financial Services

Long lists of detailed requirements Wireframes for MVP

Before Value Discovery

Workflow: Document management Unified view of all documents

Prospect interest, but no commitment Seeking contractor to build MVP

For this startup, Value Discovery identified what customers cared most about. This changed the product focus, reduced the requirements, and simplified the user experience. This insight helped gain nearly $1M in customer commitments, and the funding to go to market.



Before Value Discovery After Value Discovery



Fewer requirements, simpler features Mockups illustrating “New MVP”

Dashboard: Deal management Different views for different roles

4 customer commitments $950k/year @ $50/transaction Investment to launch and grow




Before Value Discovery After Value Discovery

“If you believe that you’re the subject matter expert, then you’re doing it wrong.”



Fewer requirements, simpler features Mockups illustrating “New MVP”

Dashboard: Deal management Different views for different roles

4 customer commitments $950k/year @ $50/transaction Investment to launch and grow


0% 10% 20% 30% 40% 50% 60% 70% 80% 90% 100%

Location Price

Language Recommendation

Safety Easy access to visas

Accreditation of courses Support for international students

Lifestyle Students from same country are studying there

Employment prospects Admission requirements

Scholarship and financial aid Other

Links with local institutions Performance in ranking/league tables

Transfer of credits policy

Industry Market Surveys

Factors of Importance in Language School Choice

Language instruction is becoming a commodity, with little differentiation. Schools compete largely on price, driving margins down. Value Discovery identified the Maximum Value Proposition, providing differentiation that merits a price premium. Rollout with improved pricing, branding, positioning, and new services is about to begin.

0% 10% 20% 30% 40% 50% 60% 70% 80% 90% 100%

Location Price

Language Recommendation

Safety Easy access to visas

Accreditation of courses Support for international students

Lifestyle Students from same country are studying there

Employment prospects Admission requirements

Scholarship and financial aid Other

Links with local institutions Performance in ranking/league tables

Transfer of credits policy

Value DiscoveryIndustry Market SurveysConfidence to communicate globallyEnhance career opportunitiesMake friends and gain experience

Factors of Importance in Language School Choice


Price not a major factor

Learning English not the goal

Opportunities to connect after class Easy access to social activitiesFew students from my countryNo other country dominant

Language instruction is becoming a commodity, with little differentiation. Schools compete largely on price, driving margins down. Value Discovery identified the Maximum Value Proposition, providing differentiation that merits a price premium. Rollout with improved pricing, branding, positioning, and new services is about to begin.

What if you knew what your customers valued most?

?Imagine how your business would change if you truly knew the “why” that made them buy.

ThankYou

Alan Albert

marketfit.com [email protected]

@A_Albert


Strategic Consulting for Measurable Growth

MARKETFIT

The Maximum Value Proposition - MarketFit · Minimum Viable Product Starts with your idea Problem...

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