Product development

On Product Development: How to
define and develop your products
Ziya G. Boyacigiller
This presentation was created and given by Ziya
Boyacigiller who was leading Angel Investor and a loved
mentor to many young entrepreneurs in Turkey. We have
shared it on the web for everyone’s benefit. It is free to
use but please cite Ziya Boyacigiller as the source when
you use any part of this presentation. For more about
Ziya Boyacigiller’s contributions to the start-up Ecosystem
of Turkey, please go to www.ziyaboyacigiller.com

Ziya G. Boyacigiller (c) 2005
EMBA 2
Most Attempts to Create
Successful Products Fail
 60% fail during development
 40% of those making it to market
fail
 ¾ of money spent is lost !
 Yet failures are not random, they
are predictable and avoidable.

EMBA 3
Only if marketers define market segments
that correspond to the circumstances in
which customers find themselves when
making purchasing decisions can they
accurately theorize which products will
connect with their customers. Otherwise,
they fail since they aim their products to
phantom targets.

EMBA 4
Predictable marketing
requires an understanding
of the circumstances in
which customers buy or use
things.

EMBA 5
Milk Shakes

EMBA 6
Alternatives & Pains
Morning
breakfast
Bagels/ egg
sandwich/ coffee/
doughnuts/
banana/ …
Crumbs/
greasy/ hungry/
makes hungry/
too fast to
eat/ ..
Snack for child
Pick-me-up
while shopping
….

EMBA 7
Customers “hire” products
to do specific “jobs” – this
“job-to-be-done” approach
to segmentation is called
“circumstance-based”
segmentation.

EMBA 8
Circumstance-Based
Segmentation
 Customers have ‘jobs’ that need to get
done.
 Then customers look for products or
services they can ‘hire’ to get the job
done.
 The functional, emotional, and social
dimensions of jobs constitute the
circumstances in which they buy.
 Circumstances is what we need to analyze
in segmentation, rather than the
customers themselves.

EMBA 9
How you view the market for handheld
devices will determine what product
features you consider to be relevant
Product View Demographic
View
Job-to-be-Done
View
Market
Definition
Handheld wireless
devices
Traveling sales
person
Use small snippets of
time productively
Competitors Palm, treo, clie,
iPaq, wireless
phones
Notebook PCs,
internet access,
wireless & wireline
telephones
Wireless phones,
WSJ, CNN Airport
News, doing nothing,
listening to boring
presentations
Features to
Consider
Digital camera,
word, excel, outlook,
voice phone,
organizer, …
Wireless internet
access,
downloadable CRM
data/functionality,
online stock
trading, e-books,
email, voice
Email, voice mail,
voice phone, headline
news, simple-single
player games,
entertaining top-ten
lists, always on, SMS
top news, …

Key to Success for an
entrepreneur is creating a
Product/Service

EMBA 11
Crossing the Chasm is centered
around your “differentiation”
 Compelling reason to buy
…translated into
 Unique (differentiated) value proposition
…leads to need to develop the
 “Whole Product” – without which it is hard
(very very hard!) to cross the chasm

EMBA 12
Whole Product Model
Whole Product includes anything else you would need
around your product/service to fulfill your compelling
reason to buy…
GENERIC
PRODUCT
(tornado)
EXPECTED
PRODUCT
AUGMENTED
PRODUCT
POTENTIAL
PRODUCT

EMBA 13
Whole Product:
 Ensures you have a monopoly to fulfill
compelling reason to buy better than
competitors (if you win on TTM)
 Create a monopoly such that for the
target market and application your
product is the only reasonable alternative
 This should lead to make your product a
standard in the industry & the market

EMBA 14
Whole Product wins sales…
Since your product is defined for the target
segment and is a Whole Product, it will
meet the requirements of the customers
better than any other product available.
This will make you own the market, have
a monopoly.
Ex: TI did this with their TI83 type calculators for high-
school students… There are many other calculators but all
high schools use the TI83. Why?

EMBA 15
Network Effect
(a.k.a. Metcalfe’s Law,
snowball, hockey-stick)
 Integral of the
adoption curve
 Positive
feedback
system
 Ex: Microsoft
Office/ DOS,
CD vs long-play

EMBA 16
Why need Positioning…
 Pragmatists need competition to evaluate
products and vendors before buying.
 Competitive Position is a condition for
sales
 Pragmatists look for market-centric
(augmented by product-centric) inputs to
buy
 If there is no competition, create it! If
there is, compare yourself to it…

EMBA 17
How to Position:
 Name it! – New Product Category
 Form The Claim – a.k.a. The Elevator
Test
• For target customer who are dissatisfied
with market alternative our product is a
name it that provides key problem solving
capability. Unlike product alternative we
have assembled key whole product features
only you offer.
• Pick one, and only one, claim!

EMBA 18
Why one-claim…
 In all communications consistently use the
same claim over and over again.
 Establishing a position takes time and
resources
 Frequency of exposure to the merchandising
message is important to establish position in
customers’ minds.
 Multiple claims will confuse customers – you
can’t be all things to all customers

EMBA 19
Strategy for Crossing the
Chasm
• The only safe way to cross the chasm (unless
there is a proven winner) is to put all eggs in
one (segmented) basket (focus)
• This concentrates your forces for maximum impact
(one market, one message)
• Identifying a single beachhead of pragmatist
customer with a single application leverageable to
other segments (pin).
• Accelerating the formation of 100% of their whole
product (fulfilling a compelling reason to buy).
• Repeating the process with next pins, one at a time
(Bowling Alley).

EMBA 20
S e g m e n t 1
A p p lic a t io n 1
Customer
references
W
hole
Product
S e g m e n t 2
S e g m e n t 1
S e g m e n t 3
S e g m e n t 2
S e g m e n t 1
T O R N A D O
.. .. .. .. . .. .. .. .. .
.. .. .. .. . .. .. .. .. .
.. .. .. .. . .. .. .. .. .
Bowling Alley Market
Development

EMBA 21
Bowling Pin Model
• Each pin (niche or vertical market) is defined as the
combination of the specific product application in a
specific market segment.
• Each pin requires its whole product.
• Adjacent niches provide references.
1. Primary goal for targeting the pins:
• Get your product adopted as the market leader
(standard) in as many niches as possible.
• Dominate a segment with >40% market share in
12 months (or other specific time frame)
1. Secondary goal:
• Develop a compelling reason to buy.

EMBA 22
Bowling Pin Model, cont.
• Key focus: end-user community economic buyer with
budget responsibility (not a technical community).
• Key criteria for selecting Bowling Alley pins:
• Are they small enough? (Do not attack the segment
bigger than you are; pick on somebody of your own
size.)
• Will they serve the strategic goal?
• Over invest when invading a new pin to accelerate your
rise to market leadership:
• Deliver superbly engineered whole product without
having to tie yourself to ongoing customization
commitments.
• This is the only way to divert resources to the next
pin.

EMBA 23
The Chasm Crossing
Warnings
 Attempts to cross the Chasm without a niche
market approach are almost always failing.
 Consequences of sales driven strategy
(chasing every opportunity) during the chasm
period are fatal.
 Company can afford to support only limited whole
products.
 Winning customers in several market segments does
not create critical mass for “word of mouth”
momentum indicating a leader.
 Lack of “word of mouth” makes selling the product
harder, more expensive and more unpredictable.
 Lack of dominating leadership status (gorilla) does
not entice pragmatists to buy.

EMBA 24
Bowling Alley Problems
• People are in too much of a hurry to properly execute
Bowling Alley strategy.
• Companies fall in love with the first few niches and settle
in them for life forgetting about Tornado.
• Companies get trapped in the lure of recurrent service
revenues and never design a pared down product (generic
product for main-street) that could break free from the
need for value added service support.
 Structure of consumer markets does not support Bowling
Alley strategy.
 Inability of giving up R&D product-centric perspective in
favor of customer-based application centric by
entrepreneurial executives.

EMBA 25
Show Evidence -
Visionaries:
 Benchmarks
 Product Reviews
 Design Wins
 Initial Sales Volumes
 Trade Press Coverage
 Endorsements

EMBA 26
Show Evidence –
Pragmatists:
 Market Share
 Partners and Allies (quality &
number)
 Third Party Support
 Standards Certifications
 Applications Proliferations
 Vertical Press Coverage
 Industry Analyst Endorsements

EMBA 27
Strategy for Approaching the
Economic Buyer in Bowling Alley
• Offer new product solving existing problem
costing customer money (time to +ROI).
• Show that the problem is inherently related to
current infrastructure paradigm, and the
situation is getting worse or not getting better.
• Show that new paradigm eliminates the root
cause of the problem.
• Show that you learned the application in-depth,
and you bring not only the core product, but the
whole product as well.
 Present the whole product.

EMBA 28
Partners and Allies…
To build
the Whole Product
make use of Partners and Allies
when necessary.
This will get you to market faster and
require less resources.

EMBA 29
Choice of Distribution for
Crossing the Chasm
 Use direct sales and support as a demand
creation channel to penetrate the initial
target segment, then (in fact CEO should
sell first!)
 Once the segment has become aware of
your presence and leadership, transition
to the most efficient fulfillment channel
you can offer.

EMBA 30
Choice of Pricing for
Crossing the Chasm
 Set pricing at the market leader price
point.
 This reinforces the claim of market leadership.
 Build a disproportionably high reward for
the distribution channel into the price
margin.
 With time, you can respond to competitive
pressure by reducing this award.

EMBA 31
Attack…
 Demand Generation (Direct Sales is
best for early sales activity to
control results)
 Demand Fulfillment (Web or Retail is
necessary for high volume sales
expansion)

EMBA 34
Side Bar:
Product Road Map
Revolutionizing Product Development, Wheelwright & Clark

EMBA 35
Why Product Road Maps?
 To move from 1-product-company
to multiple-products-company
 To decide what products to develop
first
 To show key stake holders where
the company is headed
 To convince potential investors how
value will be created

EMBA 36
Side Bar:
Objective Specification Plan
OSP
“Plan” first in
detail – it will
look like
precious time is
being used up,
but the overall
project will be
done faster.
Inside every
small project is a
bigger one…
Do not “waste”
time with
planning - start
“doing” right
away. Plans
change
anyways…This
is not a big
project…

EMBA 37
Major Benefits of OS Process
 Forces feedback & input from team members
(current & future) and market/vendors/partners
 Forces methodical search for best alternatives
 Forces coordination of people & departments
 Forces proper resource allocation
 Forces commitment & accountability
 Forces new product pipeline discipline
 Forces company to learn (P. Senge)
 Minimizes changes & re-work, results in best time to
market (TTM) once project starts

EMBA 38
Start-ups need to win on
TTM

EMBA 39
Typical OSP Process
1. Team must include customer expert, business expert,
implementation expert, and others as needed.
2. Obtain customer requirements including target price
3. Survey substitute products on market
4. Survey competition’s capabilities/likely responses
5. Review alternative solutions that can meet requirements
6. Analyze differentiators, and level of change versus risks
7. Converge on solution and write spec sheet
8. Document execution plans, by each team member & key
department in detail (commitments)
9. Time-line
10. Cost analysis
11. Sales & profit forecast, including target customer info
12. Signature page
13. Execute plan (manage project)

EMBA 40
Side Bar:
Product Development Pipeline
 Pipelines are used to get predictable
results, from processes that are
unpredictable (Ex: sales, product
development, batch manufacturing)
 Pipelines work by making use of
averaging, reducing variation.
 Pipelines also work by defining a process
and continuously improving it through
organizational learning.

EMBA 41
What Some Product
Development Pipelines Look Like

EMBA 42
What an Organized Product
Development Pipeline Looks Like
1
2
3
4
5
Intro Checklist
OSP Checklist

Product development

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