Your leadership team wants to know what’s next: how will you grow revenue and increase product adoption? You must balance business objectives, product strategy, and risk tolerance.
You have a product in the market, and things are going pretty well. You have a strong team of developers, marketers, and salespeople. Your customers are pretty satisfied—although, as with any product, many enhancement requests are in the queue.
Now you're thinking: How can I increase revenue and growth? Should we add features? Or go after new markets? Or both? For each, you must assess your risk. The risk of spending resources on capabilities that won't sell. The risk of failure.
Now, risk isn’t inherently bad. But with increased risk, you’ll want confidence that you’re making the right product and market decisions. The higher the risk, you’ll want to perform continuous validation to reduce your unknowns. Show your product idea to people you want to serve and get their feedback before you spend a lot of time and resources building the final capability.
For every product, there's always a desire to add new features and new options. There's also a push to take the product into new geographies or industries. But as you've surely learned, new markets and personas have additional requirements never envisioned by the original business plan. And since you cannot do everything, you'll have to decide where to focus. New markets or new features? New personas or new options? Each has unknowns. Each may pull resources from something else that might have better results.
You have a few options when it comes to optimizing your product.
When evaluating your product strategy, you could:
Continue to improve the existing product with new features and capabilities.
Build optional components or new similar products.
Build entirely new kinds of products.
Stabilize your existing product and seek out new personas and new markets.
The Market-Product Risk Profile tool can help you prototype your product strategy.
Use this tool to analyze the levels of risk that come with each possibility when initiating changes to your product. What is it? Who is it for? Which strategy has more risk and requires more validation?
First, break down the three types of product initiatives.
Low risk: Revisions to existing products in existing category
You can always deploy new functionality to your existing products. There are always new features to build. But at some point, you’ve built the necessary features and served all the relevant customers.
This category is safe… until it isn’t.
Riskier: New initiatives in existing category
Rather than adding new features to an existing product, consider starting up new product initiatives for similar products or complementary components to your base product.
Complementary components might include such things as improved dashboards or expanded interfaces to popular systems that are attractive to some customers but not needed by all of them.
New (but related) product initiatives are similar to your existing products. The risk for these is still reasonably low because you’re working with a product or platform you know well; the incremental learning is limited to functionality.
Riskiest: New initiatives in a new category
A new category product is dissimilar from anything in your product suite; it’s materially different from what you have experience building. It may be built on new technology (or at least technology that is new to your organization).
Moving from on-premise to cloud computing is a new category, moving from computer apps to smartphone apps. Or moving from hardware (devices) to installation services (people).
A new initiative means more work for your team.
Because the underlying category is new to you, your team will need to learn how to develop, market, and sell this new product.
For example, many software companies realize the need for installation assistance and customer education but hiring, training, and deploying people differs from deploying software.
Analyze the risk with your product management tool.
Salespeople will tell you it is easier to sell new products to an existing customer than to find new customers for existing products. But at the same time, they continue to find new personas and markets who want the products you have.
In this context, “markets” means a group of customers and potential customers with common needs. Personas are archetypes of the people who will buy and use your products.
Break down the three types of market options to consider in your product strategy.
Similarly to the three types of product initiatives, market choices vary in risk.
Low risk: Existing personas in existing markets
A healthy product that’s been around for a while is typically targeted to a small set of customer types—usually three to five personas within a market segment. It’s logical to continue marketing and selling to those customers as long as the market is still generating healthy profits for your firm.
Riskier: New personas in existing markets
It is likely that your existing customers have additional personas who would benefit from your products. For example, a customer relationship management product designed initially for salespeople would soon have requests for capabilities for marketing and support teams. The good news is that you understand how to sell to clients in this market, although the specific challenges of the new personas will need to be explored.
Riskiest: New personas in new markets
As your product gets more popular in your original market, you’ll soon get requests from other market segments.
Here’s an example:
Your CRM solution was designed for manufacturing, but it could also be helpful to life sciences companies. However, your team won’t know the different issues and preferences unique to life sciences without additional research to drive new promotions and sales training.
In this example, salespeople are the personas who use your CRM tool. And salespeople in manufacturing are probably very similar to life sciences salespeople. However, consider them new personas because they’re in a different market segment; you can use the old personas as templates for the new personas and then revise them based on your engagement with these new buyers.
Profile your plans and risk.
All new ideas fit into one of these intersections of product capabilities to build and markets to pursue. Each of the nine segments has a different level of risk.
A, B, and D are safer
F and H have more risk
J is the riskiest—since there are so many unknowns.
Profile each of your product/market ideas.
A feature planned for an existing product but for a new market goes into G. A feature for a new product for existing customers goes in B.
Fight the inclination to put one idea in multiple intersections. If you’re unsure where an idea fits, you lack clarity on either the product component or the market(s) you serve. If your product is for “everyone,” then it probably doesn’t truly meet the needs of anyone.
Example of a completed Matrix
Consider a browser-based video conferencing tool (similar to Zoom or Google Meet) explicitly designed for remote learning. In this case, it is currently marketed to educators working in universities in the Americas.
Consider maintaining and revising the existing product
You can imagine the numerous requests for improvements and features to the base product, such as better teaching tools for the faculty and better ways for participants to modify their appearance with green screens or out-of-focus backgrounds. Maintaining and revising existing products in existing categories represents the majority of development work for most teams.
Explore new initiatives.
As professors look to simplify their workflows, they ask for a way to connect conferencing directly with their learning management system. Of course, there’s not just one; there are many. So instead of building these integrations into the base product, each system could be an extra-charge option. New initiatives like these are great candidates for chargeable options.
Consider the possibilities of a new category.
When product managers observe educators using the product, they see several ways to improve the learning experience. One problem they see is the professors don’t have a good way of knowing which students are engaged and which are mentally elsewhere.
After talking it over with the design team, the product manager proposes a second-screen approach:
An iPad app with a roster of students—with pictures of the students, indicators of who is engaged and not, perhaps with color coding or flags that show how they are doing in class overall as well as in this specific session.
It’s a great idea, but it’s a new category of product.
The work of designing, developing, and deploying an app is very different from what’s needed for a browser-based cloud tool. You know a lot about those who buy and use the product, but you’ll need to bring in some expertise in this “new to you” technology. Because the technology is different from what your organization has done in the past, it’s a higher-risk decision.
Discover new personas.
In my experience, salespeople have never met a customer that doesn’t need their product—regardless of the firm’s focus on a specific target market. Your salespeople are getting calls from existing customers who want to empower students doing virtual study groups. You've never before sold to students.
These are new personas.
You'll need to research their requirements before making product and promotion decisions.
Find new markets.
Your salespeople are also hearing from potential customers outside the US. But if you want to expand to new markets, for instance, EMEA or Asia Pacific, you'll need, at minimum, Internationalization and localization. Engaging with a new market will definitely require investments in promotion and sales enablement.
Use the market/product risk tool to ensure confidence in your product/market decisions.
All of these product/market ideas seem good, but with limited resources, we cannot do everything. Analyzing your options using this product management tool will help you make the best decision for your product.
Be confident in the amount of risk you’re taking for your product.
Product decisions should not be arbitrary.
Just because one person asks for a feature doesn’t make it a good strategic decision. After all, you can’t do everything when you have limited resources—as we all do.
Use the Market-Product Risk Profiles tool to identify your product strategy focus and the risk associated with your decisions. The higher the risk, the more you need caution in your estimates. And more market validation than a lower-risk solution.
You might enjoy reading our eBook, "9 Steps to an Effective Product Strategy." Learn how to close the strategic business skills gap.