Before building a product an understanding of the business is necessary. This is broken into three categories:
- What product are we building?
- How do we know if our product is good?
- What else has been, is being, and will be built?
1. What Product are we Building?
Is it an existing product or is a brand new product?Why Does the the Company Exist?
Start with Why
Examples are mission statements
Apple Example: "Think different" campaign "here's to the crazy one's
“With everything we do, we aim to challenge the status quo. We aim to think differently. Our products are user-friendly, beautifully designed, and easy to use. We just happen to make great computers. Want to buy one?”
What value are you adding to customer's lives?
The fundamental mission to a business cannot be "to make money". Revenue is validation that company is doing the right thing for its customers.
“As a product manager, keeping the company’s core value proposition in mind will help you understand the company’s vision. Understanding the vision will let you understand the company’s goals, which lets you understand its product roadmap. ”
Customers and Personas
In short, “who are the customers for your product, and why are they buying your product? You will optimize your products for these people.”
“We can take the various common traits we care about in our potential customers and abstract them out into a persona. A persona is a fictional, typical customer, and defining key personas lets you segment your customers by highlighting the things your customers care about that are relevant to your product. ”
“You’ve likely already talked about a persona without realizing it. When someone asks, “Can my mom use it?” they don’t mean their actual mom, she might be a rocket scientist. Instead, they mean the “mom” persona of a middle-aged person who is never the first to buy new technology, and will break many gadgets simply by turning them on. When”
Roman Pichler's template
“For example, IT Tech Tom might be very busy his entire workday with customer support tickets. He would likely favor a new automated machine deployment system over one that involves lots of manual intervention.”
“A way to envision these customer’s priorities is to imagine the customer’s journey. What problem is a given persona trying to solve, what does he do when he tries to solve it, and what happens as a result? Tell us a story about the customer.”
“Harvard Business School professor Clayton Christensen has been working on a customer-segmentation approach he calls “jobs to be done” for over a decade. Thinking this way helps build great personas. The example Christensen gives is that when a fast-food company tried to improve its milkshake sales, it first did traditional demographic segmentation and asked each persona (e.g., the 18–35-year-old milkshake drinker) about her ideal shake and implemented changes. Sales were stagnant.
But when the fast-food company focused on who bought milkshakes, when they bought them, and where they drank them, it found a different way to segment its customers. One segment bought milkshakes in the morning to keep them feeling full until lunch. As an added benefit, the morning milkshake gave them something to occupy their free hand while driving during a boring commute.
That group wants a milkshake that takes a while to drink so that it lets them feel full longer and lasts for the commute. Now consider another segment: customers buying milkshakes as a special treat for young children. Kids likely just want a tasty treat and don’t have the patience to drink a milkshake for 30 minutes. Using pains[…]”
Use Cases
“Use cases are simply how a company expects each persona to use the company’s product to achieve a goal. They provide the context to let you understand the link between your personas and your products.”
Based on the persona, identify the "run the business" (RTB) tasks which are the user stories. Most likely, features will be built to solve these tasks.
Enterprise vs. Consumer Companies
- Identify if company is building enterprise (B2B) or consumer (B2C) products.
- B2B involves more decision makers to purchase
- For example, a CTO approves buying HR software but HR is the department that will be using it
- You will need to account for additional decision makers for B2B
2. How do we know if our product is good?
Metrics
“Metrics are the measurement of different aspects of your product. These might include things within your product, like how many people complete a task, or things affected by your product, like how much revenue you’re making. Success metrics, sometimes called key performance indicators (KPIs), are the key metrics that define how we keep score, like how many goals you scored in a soccer game.”
“Success metrics are useful because they help us validate if our current strategy is working, and if it’s not we can dig into the overall metrics to come up with a hypothesis for how we could make changes to achieve our success metrics”
- Identify company short and long term strategy goals
- Example goals
- Growth, Revenue, customer satisfaction, brand awareness,
“For example, it’s common to see companies switching their short-term goal from growth (people are using our product) to revenue (people like our product enough to pay for it). When goals change, what was a success metric one week might just be considered a regular metric the next week.”
“Maybe your current company success metric is brand awareness, a common initial success metric for startups. In that case, your product success metrics will include number of downloads of your app, visits to your website, and so on: metrics that indicate people are aware of your company and products.
Later on, your strategy might shift to making your app part of people’s lives, in which case your success metrics will focus on engagement: Of those who downloaded the app, how many complete a core task? How many customers do that task each day/week/month? As your strategy and success metrics change, your product plan and the features you choose to work on will similarly shift—you want to make sure what you’re working on supports your goals and success metrics.”
How do we pick the right goals and supporting success metrics? "The Hierarchy of Engagement" by Sarah Tavel - Pinterest's founding PM for search and discovery.
“Tavel noted that there are three distinct strategy phases startups, and by extension new products, go through:
- Engagement
- Retention
- Self-perpetuating
Startups that go through all three tend to turn into multibillion-dollar companies, whereas startups that get stuck in one phase commonly fail.”
The goal of the first phase is the get users to complete the core action. For example, posting a photo on Instagram.
Another example is Viddy, they had 35 million users sign up but only 5 million users complete the core action. They went out of business.
Retention
“After companies saw good engagement—what “good” means varies—they’d shift towards retaining users with success metrics around how frequently those customers use the product in a given time period. The idea is that if the product gets better for users over time, they will keep using it and they’ll miss out if they leave. In fact, it’s better to have slightly slower growth but a higher percentage of customers continuously using the product than constant growth but low retention because you’ll end up with more customers over time. A simple example of this is frequent”
Self-Perpetuating
“The final phase that Tavel describes is when your goal is self-perpetuation. This means your product has various loops that keep the customer engaged, and encourage other customers to get engaged. Your success metrics will be around how often people complete these loops. Pinterest gets better when more people post pins because this leads to better discovery of new, relevant things to pin. And sharing notifications (which we’ll look at more in Chapter 3 with the Hook Canvas) encourage both new customers to pin something and existing users to return to the product.”
“Tavel goes on to describe cohort performance as the ultimate success metric your company should look at over time, encompassing all three of these stages. Specifically, look at the number of weekly users completing the core action and the percentage of weekly active users completing the core action over time. This shows growth from the size of the cohort, engagement from the ratio of users completing the core action, and retention from your performance over time.”
Vanity vs. Actionable Metrics
Vanity metrics are those that sound useful, and might be great for some other business need, but don't help measure product performance.
Actionable metrics are real data we can use to make decisions.
Example, “When you’re launching a new product, say an app, as a product manager your goal is to have people completing the core task. Maybe 1 million people downloaded your app on the first day—congrats! That sounds awesome, right? While getting someone to be aware of and download your app is the first step, it doesn’t mean they actually opened and used your app—things look very different if only 10 people actually completed your app’s core task.”
Net Promotor Score (NPS)
“NPS is measured by asking customers, “On a scale of 1–10, how likely is it that you would recommend [brand] to a friend or colleague?”
Promoters rank your brand 9 or 10 and are “loyal enthusiasts who will keep buying and refer others, fueling growth. “These are the people you want! Passives will rank you 7 or 8 and are “satisfied but unenthusiastic customers who are vulnerable to competitive offerings.” Detractors score you from 0 to 6 and “are unhappy customers who can damage your brand and impede growth through negative word-of-mouth.”
“Measuring NPS over time is a way to see how customers are reacting to the product changes you make (or don’t make). If your company’s goal is customer satisfaction, with NPS as your success metric, and your NPS is lower than you’d like, then your immediate product goals will be around improving your customers’ happiness.”
“Roadmaps are often fairly detailed in the short term—short term being 3 to 6 months for most software, 6 to 12 months for large software projects, and 12 to 18 months for hardware—and become more vague over the long term. ”
“The best roadmaps are ones where the company has set goals to achieve and then planned projects that will help it achieve those goals. ”
Actionable metrics are real data we can use to make decisions.
Example, “When you’re launching a new product, say an app, as a product manager your goal is to have people completing the core task. Maybe 1 million people downloaded your app on the first day—congrats! That sounds awesome, right? While getting someone to be aware of and download your app is the first step, it doesn’t mean they actually opened and used your app—things look very different if only 10 people actually completed your app’s core task.”
Net Promotor Score (NPS)
“NPS is measured by asking customers, “On a scale of 1–10, how likely is it that you would recommend [brand] to a friend or colleague?”
Promoters rank your brand 9 or 10 and are “loyal enthusiasts who will keep buying and refer others, fueling growth. “These are the people you want! Passives will rank you 7 or 8 and are “satisfied but unenthusiastic customers who are vulnerable to competitive offerings.” Detractors score you from 0 to 6 and “are unhappy customers who can damage your brand and impede growth through negative word-of-mouth.”
“Measuring NPS over time is a way to see how customers are reacting to the product changes you make (or don’t make). If your company’s goal is customer satisfaction, with NPS as your success metric, and your NPS is lower than you’d like, then your immediate product goals will be around improving your customers’ happiness.”
3. What Else has been, is being, and will be built?
Roadmap
“A roadmap is a document that shows what the company/product is doing now, what the company/product plans to do over the next N months, what the company/product plans to do later, roughly how much effort each high-level task will take, what products the company will create, and what features they will have, etc.”“Roadmaps are often fairly detailed in the short term—short term being 3 to 6 months for most software, 6 to 12 months for large software projects, and 12 to 18 months for hardware—and become more vague over the long term. ”
“The best roadmaps are ones where the company has set goals to achieve and then planned projects that will help it achieve those goals. ”
Competition Climate
“The last element to think about when trying to understand a company is what’s going on around that company: What are other people building? Who are the company’s main competitors? How are their target use cases, personas, and end customers different? How are their products different? How are they winning or losing compared to another company? Are you aware of who’s out there?”
Company
“This refers to the company’s experience, technology, culture, goals, and more. It’s similar to the material we covered in the “Why Does the Company Exist?,” “How Do We Know If Our Product’s Good?,” and “What Else Has Been, Is Being, and Will Be Built?” sections.”
Customers
“Who are the people buying this product? What are the market segments? How big are they? What are people’s goals with buying this product? How do they make buying decisions? Where do they buy this type or product? This is similar to what we covered in the “Customers and Personas” and “Use Cases” sections.”
Collaborators
“Who are the external people who make the product possible, including distributors, suppliers, logistical operators, groundwork support personnel, and so on?”
Competitors
“Who is competing for your customers’ money? This includes actual and potential competitors. You should look at how they position their product, the market size they address, their strengths and weaknesses, and more.”
Climate
“These are the macro-environmental factors, like cultural, regulatory, or technological trends and innovations.”
Product
“Sometimes product managers add a “P” to the 5C structure for “product,” and specifically call out the product(s) the company makes.”
A 5C +P Analysis
“There’s a framework called 5C that’s similar to the areas we just covered. It’s a situational framework, meaning it helps you understand a company’s current situation so that you can create an opportunity hypothesis.”- Company:
- Customers
- Collaborators
- Competitors
- Climate
- Product
Company
“This refers to the company’s experience, technology, culture, goals, and more. It’s similar to the material we covered in the “Why Does the Company Exist?,” “How Do We Know If Our Product’s Good?,” and “What Else Has Been, Is Being, and Will Be Built?” sections.”
Customers
“Who are the people buying this product? What are the market segments? How big are they? What are people’s goals with buying this product? How do they make buying decisions? Where do they buy this type or product? This is similar to what we covered in the “Customers and Personas” and “Use Cases” sections.”
Collaborators
“Who are the external people who make the product possible, including distributors, suppliers, logistical operators, groundwork support personnel, and so on?”
Competitors
“Who is competing for your customers’ money? This includes actual and potential competitors. You should look at how they position their product, the market size they address, their strengths and weaknesses, and more.”
Climate
“These are the macro-environmental factors, like cultural, regulatory, or technological trends and innovations.”
Product
“Sometimes product managers add a “P” to the 5C structure for “product,” and specifically call out the product(s) the company makes.”
Excerpts From: Josh Anon. “The Product Book.”
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