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Traversing the Traction Gap

Page 11

by Bruce Cleveland


  Why do companies fall for the solution space trap? Simple. Many market signals (e.g., customer complaints) come in the form of symptoms and even solutions (e.g., fix this or build this great new feature!). Your job is to interpret those signals, identify any root causes, brainstorm solutions, and then go back to the symptomatic customers to see if the root cause and solution are correct.

  In other words, you allow the complaints to determine the boundaries of the problem—and from there, you choose the limit of the number of options for a solution. But what if the real problem is beyond those boundaries you’ve set for yourself? Then you will miss the problem completely; but worse, you will waste time and treasure in implementing the wrong solution.

  When Oxo, a kitchen utensil company, asked customers what was wrong with its measuring cup, the customers talked about the cup’s breaking when they dropped it or its having a slippery handle. But when Oxo watched people use the measuring cup, they saw people pour, then bend down to read the measurements, then pour, then bend, then pour, then bend. Nobody asked to be able to read the measurements while pouring, but Oxo was able to see the need. They now sell a measuring cup with the measurements at an angle so you can see the lines while pouring liquids into the cup.

  Identifying and then operating within the problem space is, it almost goes without saying, a cornerstone of the market-first approach. And, in fact, it forms the basis of the definition of market-first.

  The lesson is simple: start with the problem space, and you will end up with more effective solutions.

  What Does the Market-First Product Process Look Like?

  ■ From Product-First/To Market-First ■

  FROM

  TO

  Product-First

  Market-First

  Customer-driven focus

  Market-driven focus (including noncustomers)

  Making decisions based on opinions & anecdotes

  Making decisions based on market facts & signals

  Ad hoc product management

  Data-driven product process

  Focusing on the solution space

  Focusing on the problem space

  ■

  MARKET-FIRST BENEFITS

  It is difficult to overestimate the benefits and importance of knowing the market to facilitate market/product fit. There are countless examples of product failures because companies assume that innovation and disruption are enough to guarantee demand. It isn’t.

  Companies that don’t know the market can introduce products that go nowhere, because there’s no market for them. Take Pepsi, for example. In the late 1980s, two trends collided. The cola wars were in full swing, with the two giants Coca-Cola and Pepsi routinely taking swings at each other, and the coffee market was shrinking. Coke and Pepsi left no market unexplored, trying to hijack each other’s flavor profiles and making ill-fated brand partnerships and crossovers.

  Looking for untapped markets, Pepsi zeroed in on the morning beverage market, which had been dominated by another caffeinated beverage, but of the hot variety: coffee. Given the coffee market’s decline, Pepsi attempted to capture that market with a high-caffeine version of their soft drink, to kick-start a person’s day. Pepsi A.M. was marketed toward the niche market of giving soda drinkers an alternative to coffee as their beverage of choice in the morning.

  Needless to say, the demand for a morning soda had been grossly overestimated, and Pepsi A.M. was discontinued in 1990, just a year after being released into a couple of test markets.

  If you are reading this book over a hot cup of coffee and not a cold can of Pepsi, it is because innovation and disruption alone do not generate market fit. Needless to say, Pepsi failed to take a market-first approach.

  A market-first product approach helps increase the likelihood and speed of market/product fit by guiding the decision-making process with key data from market signals. If you are a startup with no prior product in a market, everyone is a noncustomer, and capturing accurate market signals from them is the only thing you have to rely on.

  Armed with the data, startups can help facilitate market/product fit by:

  reducing pivots

  minimizing overbuilding or underbuilding MVP

  minimizing features that are not used

  Once you cultivate a strong Market IQ, you begin to see that market/product fit is not a one-time event for a new product: the market continues to shift, and companies/products must constantly evolve as well.

  ■

  MARKET-FIRST DEFINED BY OTHERS

  I suspect many of you already intuitively recognize the benefits of a market-first product approach. In fact, there are lots of leaders across a variety of industries who have expressed the importance of considering the entire market. Here are some of my favorites:

  “The key is to find your problem, understand your problem and only build something valuable if you’re solving a problem you know better than anyone else. I knew exactly what problem I wanted to solve. Find a problem that you really are obsessed with and understand it better than anyone else, that’s the only way to find a valuable answer. And do what you love, you’ll do it and you’ll love doing it and you’ll be happy.”

  EMILY BROOKE, CEO & Founder, beryl.cc (formerly Blaze)

  “We started by looking at the industry generally and found there was a gap in the market. We spent a lot of time researching the market, to understand what others were doing and where we could create value.”

  LUKE STATTER AND SAM DRIVER, Founders, Thousand Yard Films

  “If you sit on your laurels, there’s a risk your customers will move away from you. You could have a perfectly good product or service, but your customers may have become more demanding or there may be new, cheaper or more innovative competitors in the market.”

  JOHN FITZGERALD, Chief Executive, BRAVE

  “Everybody always says that knowing your market is everything. Saying it is one thing, but understanding why it is so important will help you stay ahead of the pack.”

  JAMES CAAN, former Chairman, Startup Loans Company

  ■

  I’M ALREADY MARKET-FIRST!

  Excellent! That means you have already committed to using market signals from customers and noncustomers to help manage production.

  In my experience, the people and startups who are committed to a market-first product approach ensure that they are committed to collecting and interpreting all the market signals, not just a select few.

  Just to make sure that you are collecting and interpreting the best market signals, let’s confirm that you collect data from current customers, prospective customers, noncustomers, nonprospective customers, ecosystem, competition, influencers, partners, and employees.

  And that the data you are collecting involves the list I’ve provided previously: Discovery interviews, large-scale surveys, smoke tests, usability testing, usage data, A/B testing, engagement analysis, customer support, NPS and customer experience data, social media sentiment, and community feedback.

  If you are missing any of these, you’d better make a convincing case to yourself that they aren’t necessary. Until that occurs, you should be haunted by the possibility that you are missing a key source of valuable data.

  ■

  THE TRANSITION TO MARKET-FIRST

  One reason I am so passionate about the market-first product process is that I see the inevitability of its adoption. I am confident that you already know the old days of building products on a hunch are gone—or soon to be gone, because your competitors are ever more likely to pursue a market-first, data-driven approach.

  You are a decision maker—and decision makers want to make decisions based on data. Decision makers have always longed for this, but getting salient data has previously been considered too difficult or time-consuming. And the introduction and widespread adoption of Agile software development methodologies, which advocate continuous releases of
code into the market every three to four weeks rather than one or two releases a year, only exacerbates the market signal collection and market validation problem.

  Making decisions without consulting data is simply not the world we live in anymore. According to the EMC Digital Universe 2014 report, “Like the physical universe, the digital universe is large—by 2020 containing nearly as many digital bits as there are stars in the universe. It is doubling in size every two years, and by 2020 the digital universe—the data we create and copy annually—will reach 44 zettabytes, or 44 trillion gigabytes.”5

  In the good old days, prior to, say, the 21st century, product teams could occasionally scrape by with intuition and selective data that supported their ideas. No longer. Now we can obtain mountains of useful data on every possible subject—all with the touch of a few keys. The challenge in the digital economy and the First Intelligence Age is no longer getting the right data. The challenge now is to ask the right questions.

  The old excuses for not being market-first are vanishing by the second. The data is out there. The data is ready to be collected and interpreted. The market signals are ready to help fact-check, support, and expand the power of your intuition. The Golden Gut school of business strategy has been relegated to the dustbin of history.

  “Startups don’t fail because they lack a product; they fail because they lack customers and a profitable business model.”

  STEVE BLANK, Adjunct Professor, Stanford University; author, The Startup Owner’s Manual

  But how can you be market-first quickly and cost-effectively, especially when three resources you need as a startup—time, capital, and expertise—are in short supply?

  Until recently, it has been extremely difficult unless you developed your own internal tools and expertise . . . and even then, it was challenging.

  However, I am excited to share with you the fact that I decided to address this market-first problem head on. I personally founded—and Wildcat Venture Partners funded—a company called Obo (www.obo.pm), whose mission is to enable product teams to become market-first—make better, faster data-driven decisions so they can create products the market needs.

  Obo executed a large market survey of more than 2,000 companies—half from the technology sector and the other half from all other industries—to identify key product challenges.

  Market Research Participants

  FIGURE 18

  Here are some of the findings from the survey:

  Product Professionals

  FIGURE 19

  Leading Companies Aspire to Leverage

  FIGURE 20

  This study confirms that the vast majority of companies—startups or otherwise—still rely on gut feel, informal or suboptimal product processes, and decisions by “HIPPO” (the highest paid person in the organization).

  And, because this void has been recognized by others, Obo isn’t alone. There are now other startups emerging with applications to help address market-first issues as well; after all, if there were no challengers, there would likely be no market!

  However, until and unless you adopt a market-first mindset, none of these product process applications will enable you to truly become market-first.

  I have no doubt that, if you take the time to harness and interpret a comprehensive set of market signals, you will not only save money and time—and perhaps your startup—by avoiding bad ideas, you will also know why one strategy is working and why another is not . . . which is the key information you need to really make a difference.

  As part of the research for this book, I had a few members of our team interview Sean Ellis.6 Sean is the CEO and founder of GrowthHackers.com. He is credited with coining the term “growth hacking” after using it to develop powerful growth strategies for Dropbox, Eventbrite, LogMeIn, and Lookout. Sean also founded and sold customer-insights company Qualaroo, growing it to millions of dollars in recurring revenue with customers such as Uber, Starbucks, and Amazon. Finally, he is the coauthor of Hacking Growth, a book which has received much attention since its initial publication in 2017.

  Sean is considered by many to be the “guru” of growth marketing strategies—primarily for B2C companies—and his perspective is useful to this discussion. And many of these B2C marketing strategies also work for B2B marketing. B2B applications are now invited into companies through the “front door”—by individual employees and teams, not the IT department, who discover their initial utility and want to put them to use inside the company.

  The discussion with Sean didn’t focus exclusively on the go-to-market phase (in Chapter 6, “Getting to Minimum Viable Repeatability,” I will share with you some of Sean’s tips for customer acquisition); it also included his observations about reaching market/product fit and using data to confirm that companies actually had achieved this milestone. Sean said:

  I did a ton of surveying of companies when I worked with them, basically going in and asking “How would you feel if you could no longer use this product” and finding those people who say they’d be very disappointed without it and essentially trying to tap into the essence of what makes the product a must-have for people.

  Once I understand that, it starts to tell me who I should be targeting. Who are the people who say they’d be very disappointed without it? Then I can dig into how they discover products like this and start to give you more ideas about the channels to find them. But I can also figure out what is the main benefit that they get from the product and how can I set the right promise when new users are coming in based on what I know the product is great at already delivering.

  That might sound just like Marketing 101, but to give you an example, I ran a survey to the user base of one of my clients where I asked them “How would you feel if you could no longer use this product” and only 7 percent of the people came back and said they’d be very disappointed without the product. But they gave such a consistent signal of the benefit that they were getting that we were able to reposition the product on that benefit and then streamline the onboarding into just that part of the app. That only took a couple of weeks, but within two weeks we took the next cohort of people from 7 percent to 40 percent.

  KEY TAKEAWAYS

  ■

  Now let’s put it all together, incorporating what we have just learned about the Initial Product Release, including a market-first approach.

  If you have successfully reached IPR, your product should be quality-assured, with few critical bugs, and should be compelling visually and functionally to use. One of the biggest mistakes startups can make is to push their product out to consumers or business users before it is ready. That is especially tragic if that company has taken the time to understand what the market needs.

  If the product is incomplete—if it still has a shoddy UX/UI or is filled with annoying bugs—it isn’t ready for anyone to see or use. At IPR, your product should be ready for a full-fledged “Beta” program.

  But that is only the beginning. Here is a closer look at the other milestones you will need to have reached to have a successful Initial Product Release:

  Product—Before a company reaches IPR, all team members should not just understand, but have internalized, what it means to be market-first. They should have met 1:1 with a statistically valid set of users and observe as they work with the product or service. Team members should have captured direct feedback and collectively documented and assessed what is and isn’t working. This process can take anywhere from 3 to 6+ months, so you need to begin early. Meanwhile, the company should not declare that the product is in Beta or ready until all critical bugs or issues have been resolved, and until users rate the UX/UI at least an 8 on a scale of 10—and that it has a positive NPS score.

  Revenue—Initial pricing models, marketing and sales waterfall conversion rate assumptions, and contract documents should be well-formed at this point. The company should have a good idea of how it intends to handle service-level agreements and reimbursements. It should
also have a reasonable idea of how it intends to go to market: Field sales? Account-based marketing (ABM)? Self-serve? Inside sales? A combination of two or more? In parallel with product-engineering, the company should be doing in-depth market-engineering to determine the category you are defining/redefining, value propositions, pricing strategies, etc.

  Team—A few new team members should have been added in marketing to complete critical work such as the company’s messaging matrix, positioning, naming, branding, and information architecture for the initial website, and to prepare content for the company’s initial market launch. You will need to perform a significant amount of user/customer data analysis going forward. As a result, a key hire is a data analyst.

  Systems—The company should have begun the process of formally evaluating systems that can automate various marketing and sales functions and support the initial revenue generation. The website should be well-architected to explain the company and the product, and, if appropriate, to enable onboarding and e-commerce functions; and it should be ready to go live.

  You have now completed the Initial Product Release phase, a critical step toward traversing the Traction Gap. Now it is time to execute on that introduction. We’ll investigate how that is done in the next chapters.

  Traction Gap Architectural Pillars

  FIGURE 21

  Percentage of emphasis during this stage.

  The following are the key principles Wildcat Venture Partners looks for at IPR:

  ■ Traction Gap Principles ■

  IPR

  Product

  Don’t build everything. Obsess about the things that users really rely on and actually use. Develop a market-first mindset and process.

 

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