The Market-Product Risk Profiles tool helps to align strategy with risk
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, there are many enhancement requests in the queue.
Now your leadership team wants to know what’s next: how are you planning to grow revenue and adoption?
There are infinite options. You could continue to improve the existing product with new features and capabilities; you could build optional components or new similar products; you could build entirely new kinds of products.
Or, you could stabilize your existing product and seek out new personas and new markets.
When considering your options, each unknown factor introduces risk. New product initiatives come with risk. New market initiatives come with risk. The more unknowns, the more risk.
That’s where the Market - Product Risk Profiles tool can help you prototype your product strategy. What is it? Who is it for? Which strategy has more risk and needs more validation?
Let’s break down the three types of product initiatives.
Revisions to existing products in an existing category. At least in the short term, 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.
New initiatives in an 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 that you know well; the incremental learning is limited to functionality.
New initiatives in a new category. A new category product is dissimilar to 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 programs to smartphone apps. Or moving from hardware (devices) to installation services (people). Because the underlying category is new to you, your team will need to learn how to develop, market, and sell this new product form factor. For example, many software companies realize the need for installation assistance and customer education but hiring, training, and deploying people is different from deploying software.
So “old product in old category” is safest (in the short-term), new-old is a little riskier and new-new has the most risk.
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.
Let’s break down the three types of market options to consider in your product strategy.
Existing personas in existing markets. A healthy product that’s been around for a while typically is 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.
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.
New personas in new markets. As your product gets more popular in your original market, you’ll soon get requests from other market segments. For 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 particular to life sciences without additional research to drive new promotions and sales training. In this example, manufacturing salespeople are probably very similar to life sciences salespeople, but 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.
As with products, “old personas in old markets” is safest (in the short-term), new-old is a little riskier, and new-new has the most risk.
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. As shown here, intersections A, B, and D are safer; sections F and H have more risk and section 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.
Risk isn’t bad
Risk isn’t bad. But with increased risk, you’ll need to increase confidence that you’re making the right product and market decisions. You’ll want to perform continuous validation to reduce your unknowns.
That’s why the concept of MVP (minimum viable prototype) is so valuable. 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.
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. Download the editable PDF here:
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About the Author
Steve Johnson is an author, speaker, and product coach using modern methods to move products from idea to market. His approach is based on the belief that minimal processes and simple templates result in a nimble product team. Steve has been a long-time advocate for product management, serving as an executive and advisor to many technical product organizations and industry associations. Steve is a former instructor and vice president at Pragmatic Institute as well as co-creator of the popular QuartzOpen framework.