I see organizations struggle with this decision time and time again. There is plethora of great ideas for new products or business offerings, however, how do we pick out the ideas that we’re willing to invest further from the ideas that might not be right for our organization?
In many organizations such decisions are often left to intuition – a gut feeling, a spidey sense. In a perfect imaginary world of unlimited budgets and happiness, we’d simply start to build all of these ideas at once to see what sticks, however in the non-imaginary world this isn’t very achievable or prac – so how do we choose?
In my experience, all product or offering ideas go through a lifecycle. I’m a big believer in the Customer Development model, where a product’s evolution is very customer driven ensuring an idea or product concept is best aligned to our customer’s needs as possible. However, even before we begin the investment into a new product or idea, we may want to have a few gates or a checklist that will help us choose the right innovations to further invest in.
I’m a big fan of checklists – as these are extremely efficient ways to help embed practices throughout our organization. Years ago I created a “practice maturity model” for Imaginet where practices (essentially the same as a product but for consulting and service organizations) would go through a maturation process – and it would start with a simple “should we even do this” checklist. Why a checklist? Well, the simple reason was that I didn’t want to see investment into new practices that were clearly not going to work for the company. Making effective decisions requires massive elimination and the removal of options. I also wanted to make sure that certain conditions would be met (entry criteria) before a practice was considered for further investment.
Turns out I was on to something. In 2008 I read a book called “Inspired: How to create products customers love” and came across a section called Assessing Product Opportunities. The author describes his use of a very lightweight document called the Product Opportunity Assessment (POA). The POA servers a few purposes – first, it can help prevent the company from wasting time and money on poor or immature opportunities and second, allow the team to focus and understand what success ultimately looks like for the products that will continue to get investment.
The POA asks 10 fundamental questions:
- What problem with this solve (value proposition) – this helps to capture the initial assumptions around the value the product provides to the customer
- For whom do we solve that problem (target market) – this is the beginning of a deeper understanding and identification of the paying customer.
- How big is the opportunity? (market size) – gets the author of the POA to think about how broad the product appeal could be and how many customers can benefit from the solution.
- How will we measure success? (metrics/revenue strategy) – a recognition that in some form, we’re going to do this to make money or achieve some other goal – what are these goals?
- What alternatives are out there now? (competitive landscape) – forces the author to take a look around to see what others are doing in this space.
- Why are we best suited to pursue this? (our differentiators)- allow the author to express why we would be different than the next best solution on the market.
- Why now? (market window) – forces the author to think about the timing of the solution in the market. This is an important aspect to any product.
- How will we get this product to market? (go-to-market strategy) – a brainstorm of ideas on how we’ll reach our customers.
- What factors are critical to success? (solution requirements) – this will help us determine an initial guess of the minimum viable product.
- Given the above, what’s the recommendation? (go or no go)
This document is not a detailed plan to the end of days. The POA is a document of assumptions – a set of “best guesses” aka a hypothesis that we can work to further refine and evolve through additional customer development practices. What this document does do, however, is gets us to start thinking about some really important things before we start jumping into the solution. If we can’t answer questions like “who the target market is” or “what problems we’re trying to solve” or “what makes the idea different”, then we should stop and consider the investment. Most importantly, I’m a huge believer with “starting with the end” – meaning, if you want to know how to be successful, you need to start with the end state, and work backwards. If we can’t envision and measure success – this is a clear indicator to me that the idea may not be mature enough for further investment.
Of course, the POA as outlined in the book “Inspired” is one example of such an exercise. You may choose other techniques as well. Another common model that seems to be in fashion these days is the “Business Model Canvas.” The Business Model Canvas is a strategic management template for developing new or documenting existing business models. It is a visual chart with elements describing a firm’s value proposition, infrastructure, customers, and finances. It assists firms in aligning their activities by illustrating potential trade-offs. The Business Model Canvas was initially proposed by Alexander Osterwalder based on his earlier work on Business Model Ontology all the way back in 2004. Its been recently popularized by a book called “Business Model Generation: A Handbook for Visionaries, Game Changers, and Challengers”
Similar to the POA above, the Business Model Canvas gets its authors to decompose the idea a bit, as well as answer a few questions. The BMC can be used both pre-investment as a checklist for further investing, or as a tool to help document a business model for an existing or changing product or offering.
Another variation of the Business Model Canvas is the Lean Canvas. The Lean Canvas focuses more on the Problem, Solution and Key Metrics that are promoted in Lean Startup books such as “Lean Startup” Lean Canvas was designed for entrepreneurs, not consultants, customers, advisors, or investors.
Personally, I really like all models and I promote doing what comes naturally to you and your organization. I personally like to start with a POA since it’s something that you can easily type up and not worry about graphics and spacing. The BMC or the Lean Canvas is an excellent communication tool as it helps to distill your business model into a single page representation.