Creating Products
entrepreneurship

Creating Products

Kyle Redelinghuys
Kyle Redelinghuys

A large part of the work I do in Dae.mn and BVNK is about creating products. A defined process emerges after doing this a number of times. In this post, I'll detail the general stages and validation signs to help you make better decisions during a product journey. This is from a business to business angle, but can equally be applied to consumer products.

Idea

Of course, it all starts with an idea. Ideas can come from many different places, and I've found that by thinking through a problem or area sufficiently (more than 90% of people would) ideas will present themselves. You can get many points of improvement along a journey,  and those points of improvement are all potential ideas.

A lot of the ideas I've worked on have come from two additional places: directly from clients, and related to existing work.

When ideas come directly from clients, they are normally half formed. These provide the basis for moving forward, and through investigation you can find out if this is super niche or worth exploring further.

Ideas also come from tangents related to a piece of work. One example is you are selling a CRM system, and the client mentions in passing they are looking to build an internal Data Lake. The idea here is to integrate the CRM with the Data Lake, and help the client get a better view of their customers.

Generating ideas, once you have the process down, is quite easy. Almost all of the success for a product comes from the execution.

Validation

Once you have an idea, it's time to do some initial validation. You need to think through the product and the problem you are trying to solve deeply and from first principles. Spend time thinking of each step along the journey, why the journey is what it is, and how it can be improved. Identify the gaps in your knowledge, look to fill them and then iterate. After doing this sufficiently, you should have a clear understanding of the problem you are trying to solve and the value it can bring.

When crafting the story of the product, you should focus on the value to the client, not what it does. Value always comes first.

Next you should get feedback. This is best done directly with the people who you think would purchase this idea. You want to answer the question: is this something people will buy? There has to be a sufficient need for a product to have any success. This is obvious, but way too often it is overlooked.

You then need to validate the commercials - how big is the market, how much will people pay for the product, and how much could the product be worth. At this stage these can be rough estimates, but if 10 companies will buy your product and they only value it at $100, it might not be worth the time.

Back to our example of the CRM and Data Lake integration. Research would be done to see what alternatives there are currently available, and what your solution would do differently. If there are a few competitors it's a good sign, just not if there are too many. If possible, pricing guidance can be taken from these competitors. If you can't get a hint on pricing you have to establish the value the solution will add (not the easiest to do). From the estimated value of the solution, you would take a percentage - you think this will add $1,000 of value every month, so you price it at $200 per month. The market size (number of potential clients) would be estimated. Finally, an initial overview of the product would be put together and given to a few clients for feedback. If the proposition isn't clear enough - if they don't "get it" from a 15 second pitch - rework the proposition until light bulbs go off as soon as you're done with the intro.

Sometimes you won't be able to establish some of the above - pricing can be difficult to get an idea on, the market size might be difficult to discern - in those cases, you would have to place a bet. Are you willing to bet you are right? Adjust your risk accordingly - time and capital are the two major levers you have to pull.

Proof of Value

Once you have a client with some potential interest, set up a Proof of Value. A Proof of Value is a pilot where the outcome is to establish if this solution provides the value you predict it will. These are normally short, between 3 weeks and 3 months, with well defined success criteria.

The success criteria should be based on the value the client should expect from the pilot - either costs being lowered or revenue increased. You are looking to validate your product in a real world setting, so you should focus on what matters.

As part of the proposal, you should include next steps and some tentative commitment. For example, if key parts of the success criteria are validated, the client would agree to continue discussions to a production deployment.

Iterate

After the Proof of Value, you would have learned a lot about the problem and your product. These learnings should be integrated and the product improved which will also include marketing and sales.

The product should become a better fit for the problem: include key aspects that make a difference, and drop any aspects which don't.

Sales and marketing should be informed by the value the client received. Ideally you would have some key statistics - "our product saved 10 hours per week". This should be the bedrock of your sales approach.

Expand

Now that the product is refined, you can go about getting more clients either through Proof of Value pilots or direct sales. This phase is all about further refinement of the product and iterating until you think you are ready to do a formal launch.

This judgment should be based on some metrics: how long does it take to get a new customer, how much does it cost to get a new customer, what's the estimated revenue per customer, what is the ROI on the sales channels you are using.

During this phase you want to establish a plan where you can pour money and time on the process and it directly results in sustained growth. Conversely, if you try to do a full market launch without knowing what works and what doesn't you'll be wasting money in the best case, and actively damaging your company in the worst case.

Launch

Each of the preceding phases have been leading up to this point: you've had an idea, validated it, tested it through a Proof of Value, iterated until it's a clean proposition, expanded and proved the approach.

By this stage you should have a great idea of how to go to market, and the work that needs to be done centres around putting focus on the execution of a plan you know to work.

This is the start of the product journey in earnest, everything else was pre-game. After following the process your chances of success should be measurably higher.

Whatever goal you have - you have to start, and the goal of this post was to help you have fewer false starts. Break the problem down, take one step at a time, and then you'll be making progress daily in no time.