Building Enterprise Product - For Moving Targets of Customer Needs and Outcomes

2017
(4th Edition)
Murali Erraguntala
www.ProductGuy.in

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Building New Product – My Experiences
Table of Contents
PREFACE................................................................................................................................ 6
CUSTOMER NEEDS AND PROBLEMS ARE MOVING TARGETS ........................................................................ 6
MY EXPERIENCES.............................................................................................................................. 9
BUILDING ENTERPRISE PRODUCTS – MY EXPERIENCES......................................................... 11
PROBLEM DISCOVERY TO IDEA VALIDATION ........................................................................ 14
MEASURE DESPERATION INDEX ......................................................................................................... 15
IDEA VALIDATION ........................................................................................................................... 18
TIMING NEW PRODUCT – WHY NOW?................................................................................................ 19
OUTCOME THINKING....................................................................................................................... 22
PRODUCT-MARKET FIT - DESIRABILITY................................................................................................ 25
PRODUCT FEASIBILITY...................................................................................................................... 36
ESTIMATING MARKET SIZE ................................................................................................................ 36
PROFITABILITY – VIABILITY ............................................................................................................... 37
ORGANIZATION FIT ......................................................................................................................... 38
IDEA VALIDATION PHASE CHECKLIST.................................................................................... 39
BUSINESS REVIEW ............................................................................................................... 41
MARKET ANALYSIS.......................................................................................................................... 42
PRODUCT ANALYSIS ........................................................................................................................ 45
COMPETITIVE ANALYSIS ................................................................................................................... 50
FINANCIAL ANALYSIS ....................................................................................................................... 51
BUSINESS PLAN DILEMMA ................................................................................................................ 53
BUSINESS REVIEW CHECKLIST .............................................................................................. 54
BUSINESS PITCH .................................................................................................................. 56
LAYOUT OF SLIDES .......................................................................................................................... 56
LEAN CANVAS – SUMMARIZE THE PLAN............................................................................................... 57
NEW PRODUCT APPROVAL .................................................................................................. 59
1:1 EXECUTIVE BRIEFING.................................................................................................................. 60
HANDLE FEEDBACK POSITIVELY.......................................................................................................... 61
EXUDE CONFIDENCE........................................................................................................................ 61
REFINE.. REFINE.. REFINE ................................................................................................................ 62
IDENTIFY INFLUENCER...................................................................................................................... 62
WHAT DO YOU BELIEVE – DEFINES PURPOSE ....................................................................... 64
ORGANIZATION BELIEFS ................................................................................................................... 64

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TRANSACTIONAL VS RELATIONAL ENGAGEMENT.................................................................................... 66
DID YOU FIND YOUR WHY? ............................................................................................................. 69
COMMITMENT AND CONVICTION....................................................................................................... 71
BUILDING THE NEW PRODUCT FOR FUTURE......................................................................... 73
WHY LOOK INTO FUTURE? ............................................................................................................... 74
HOW FAR TO LOOK INTO THE FUTURE ................................................................................................. 76
HOW TO UNDERSTAND FUTURE?....................................................................................................... 78
UNDERSTANDING CAUSAL-EFFECT...................................................................................................... 82
DISCOVERING NEEDS – DRAFTING PRD ................................................................................ 86
PURPOSE OF THE NEW PRODUCT – THE UNDERLYING BELIEF.................................................................... 86
REQUIREMENT VS NEED .................................................................................................................. 87
DISCOVERING VS UNDERSTANDING REQUIREMENTS .............................................................................. 88
DISCOVERY OF CUSTOMER FOCUSED NEEDS ......................................................................................... 88
DISCOVERY OF MARKET FOCUSED NEEDS ............................................................................................. 89
THINK BOLD, THINK FUTURE ............................................................................................................ 93
ELABORATE ‘DEFINING ATTRIBUTES’ OF THE NEW PRODUCT .................................................................... 95
DRAFTING REQUIREMENTS AND FRAMING MVP LIST............................................................................. 95
DELIVERING SYNERGIES BETWEEN OLD AND NEW PRODUCTS ................................................................... 96
UNLEARN AND RELEARN .................................................................................................................. 97
HAZY MARKET – OBSCURE PRODUCT REQUIREMENTS............................................................................ 98
CATCH-UP CONUNDRUM – DON’T BLINDLY CHASE COMPETITION............................................................. 98
EVERY INCUMBENT PRODUCT IS VULNERABLE – DEFY CONVENTIONAL WISDOM......................................... 100
PRODUCT/ SOLUTION HYPOTHESES.................................................................................................. 102
FINALLY, ‘WHOLE PRODUCT APPROACH’........................................................................................... 103
IMPORTANCE OF PRD................................................................................................................... 106
DISCOVERING NEEDS IS A JOURNEY................................................................................................... 107
ROLE OF GREAT PRODUCT ROADMAP - TRANSLATING STRATEGY INTO ACTION........................................... 108
PRODUCT MANAGERS SHOULD TRULY DEMONSTRATE TECHNICAL LEADERSHIP .......................................... 110
DELIVERING AWESOMENESS – ALBEIT SELECTIVELY.............................................................................. 112
DRAFTING PRD CHECKLIST................................................................................................. 116
MONITOR PLAN................................................................................................................. 118
KEEP A TAB ON MACRO FACTORS ..................................................................................................... 118
OH…. PRODUCT MANAGERS GET EMOTIONALLY ATTACHED TO THE NEW PRODUCT, CAN THEY?................... 119
PRODUCT ECOSYSTEM – IS IT READY?............................................................................................... 120
PIPES VS PLATFORMS .................................................................................................................... 120
CONNECT THE DOTS...................................................................................................................... 121
MONITOR PLAN ACTIVITY CHECKLIST................................................................................. 122
PRODUCT PLANNING......................................................................................................... 123

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FORMULATE HYPOTHESES .............................................................................................................. 124
IS MVP A TRAP?.......................................................................................................................... 126
VENDOR/PARTNER SELECTION ........................................................................................................ 130
FREEZE PRODUCT REQUIREMENTS.................................................................................................... 132
PRODUCT VS SOLUTION................................................................................................................. 134
METICULOUS PLANNING ................................................................................................................ 136
METRICS, METRICS, AND METRICS ................................................................................................... 137
PRODUCT ACCEPTANCE CRITERIA ..................................................................................................... 139
PRODUCT FEASIBILITY VALIDATION ................................................................................................... 139
EVOLVE THE BUSINESS PLAN ........................................................................................................... 140
FINALLY, BUSINESS REVIEW............................................................................................................. 141
PRODUCT PLANNING CHECKLIST........................................................................................ 143
PRODUCT DEVELOPMENT.................................................................................................. 145
HIT THE GROUND ......................................................................................................................... 146
ACTIVITY CHECKLIST ...................................................................................................................... 147
KNOW THE PROCESS ..................................................................................................................... 148
PRICING ..................................................................................................................................... 148
GTM (GO-TO-MARKET) ACTIVITIES ................................................................................................ 162
WHOLE PRODUCT APPROACH ......................................................................................................... 167
PRODUCT DEVELOPMENT CHECKLIST................................................................................. 169
MY EXPERIENCES - WHAT DID WE DO DIFFERENTLY........................................................... 171
CONCEPTUAL VIEW....................................................................................................................... 171
LOOK INTO THE FUTURE................................................................................................................. 174
BEGIN WITH AN END IN MIND ......................................................................................................... 176
DATA-DRIVEN.............................................................................................................................. 179
ENGINEERING INTIMACY ................................................................................................................ 182
PLAN MY DAY – TOOK CONTROL OF MY TIME ..................................................................................... 185
ACT AND THINK LIKE A CUSTOMER.................................................................................................... 186
CROSS-POLLINATION OF AGILE AND WATERFALL.................................................................................. 188
LEAN (‘TAG ON’) MARKETING......................................................................................................... 192
PATH TO BUILDING A GREAT PRODUCT .............................................................................................. 195
ESSENTIAL TRAITS OF PRODUCT MANAGER FOR SUCCESS OF NPD ..................................... 197
TECHNOLOGY AWARENESS, MARKET AWARENESS, AND CUSTOMER AWARENESS ...................................... 198
EMBRACE TOUGH DECISIONS .......................................................................................................... 199
ATTENTION TO DETAILS ................................................................................................................. 200
METICULOUS PLANNING ................................................................................................................ 202
GUIDE........................................................................................................................................ 202
FACILITATOR ............................................................................................................................... 203
EMBRACING CONSTRAINTS ............................................................................................................. 203

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SELF-STARTER AND PERSEVERANCE.................................................................................................. 204
CONCLUDING THOUGHTS .................................................................................................. 206
REFERENCES...................................................................................................................... 207
ANNEXURE A .................................................................................................................................208

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Table of Figures
Figure 1 - Problem-Solution Fit...................................................................................27
Figure 2 - Product-Market Fit .....................................................................................28
Figure 3 - Addressable Market vs Serviceable Market vs Target Buyers ......................37
Figure 4 - Hierarchy of Needs .....................................................................................17
Figure 5 - Lean Canvas................................................................................................58
Figure 6 - Golden Circle..............................................................................................67
Figure 7 - Transformational Engagement vs Relational Engagement...........................68
Figure 8 - Threat matrix of virtualization in service provider network.........................76
Figure 9 - Growth rate of computing systems.............................................................80
Figure 10 - Sales of luxury vehicles in the USA..........................................................101
Figure 11 - Product Adoption Life Cycle....................................................................104
Figure 12 - Product Manager Relation Cycle .............................................................111
Figure 13 - Product Planning Phase - Timeline..........................................................123
Figure 14 - Internet User Growth vs Usage Growth ..................................................152
Figure 15 - Conceptual view of Smart Parking Solution.............................................172
Figure 16 - Conceptual view of Projector..................................................................172

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Preface
Building new product is mandatory for any Organization to keep product portfolio
updated, continuously add value to existing and prospective customers, gain market
share, increase revenues, expand into newer markets, align with changing customer
needs and their behaviors, and incorporate technology trends and advancements. New
product development is both exhilarating and invigorating for Product Managers. It is an
exciting phase in the career of every Product Manager and each Product Manager will
yearn for an opportunity to conceptualize, build and launch products that customers love.
The primary goal of every product manager is to ensure commercial success through
building great products that customers will embrace readily. Yet, only 50% of new
products succeed1
. New product development is definitely a challenge and Product
Manager loses ground somewhere during the course of building an enterprise product.
Customer needs and problems are becoming moving targets
Why do most enterprise products fail?
The primary emphasis for building a great product is to discover a right problem and
getting married to it. However, customers’ needs and problems are increasingly becoming
moving targets. The needs and problems evolve, so do the solutions to address them (i.e.
the outcome too evolves) triggering an uncertainty of which needs or problems to address
and what outcomes to deliver. The biggest mistake that Product Managers commit while
building new product is to freeze needs and problems at a specific point in time and start
building products for those static needs. Nevertheless, Enterprise products address hard
problems and building such products consume around 12 – 24 months. With technology
evolving much faster than ever, market dynamics changing too fast, and human race
undergoing more changes than before, new needs or problems emerge, prevalent needs
or problems extinct, and solutions embracing technology advancements to address needs
or problems come in various shapes and forms. Primarily, Product Manager cannot taste
success building a product for static needs. Product Manager should learn to hit a moving
target anticipating how needs or problems change as a function of time in future. Agile
methodologies and MVP (Minimum Viable Product) address those fallacies by reducing
development cycles and incrementally validating whether the product is addressing right
1
Source: http://www.stage-gate.com/resources_stage-gate_latestresearch.php

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needs or right problems and delivering right outcomes. However, MVP seldom works for
enterprise products.
Why MVP and agile methodologies could not address those problems of dynamic
needs?
Enterprise products affect real businesses of customers, they might either help customers
increase revenues, manage costs or streamline operations. The fundamental truth is
enterprise products affect business in some form and hence they should be robust and
resilient with zero-tolerance for failures while addressing a real business problem that is
at the top of customers’ priority list. Therefore, delivering something quick, validating it
and incrementally evolving the product does not augur well for enterprise products.
Enterprise customers seek a complete solution. There is also a necessity for shrouding
development efforts of certain enterprise products in secrecy to introduce an element of
surprise and euphoria during launch. Then, how do Product Managers validate enterprise
products causing minimal interruption to its targeted customers? Through maintaining a
subtle balance between using MVP and relying on customer insights and experiments.
Product Manager shall use MVP at the initial stages of product development to validate
whether there is a real problem, whether the new product is addressing the real problem,
and whether the new product is targeting the right customer segment. The problem with
that approach is MVP does not consider time as one of its parameters. While constructing
a hypothesis and validating assumptions using MVP, Product Manager has to validate
assumptions across time-space ensuring whether needs or problems persist across the
duration of the product lifecycle and identify how they evolve. The appropriate approach
is to understand the causal effect between needs, problems and corresponding factors
that cause them. MVP framework for such analysis is:
I believe <target customers> experience < needs or problems> because
<trigger for needs or problems>
The fundamental premise is to understand what is causing the need while validating the
existence of a real problem or need and bundle the findings with customer insights to
understand how the need or problem manifests in future. MVP cannot be an excuse for
lack of customer insights. Building customer insights are one of the key foundational
pieces for building great products that enterprise customers want and it requires Product
EffectCause

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Managers to have a thorough understanding of customers, their business environment,
and business drivers that are causing needs or problems, which in turn can help
conceptualize solutions delivering the best possible outcome. There is a dire need for
restoring the lost art of gathering customer insights. MVP bundled with customer insights
and experiments are required for validating any assumptions related to the new product
and building a visual map of how customers’ needs or problems evolve and what new
outcomes they might desire. Product Manager should learn to hit a moving target
anticipating how needs or problems change as a function of time in future. How do you
hit a moving target with an arrow, we notice the rate at which the target is moving, how
long does it take for an arrow to hit the target and accordingly predict the possible
position of the target when the arrow is released. Product Manager should do something
similar not just to understand needs and problems of today but also to predict the needs
and problems while the new product hits the market. Doing so, the new product will hit
the bull’s eye when it hits the market.
Figure 1 - Customer needs as moving targets
Why does moving targets of needs and problems affect enterprise segment alone?
A unique challenge that Product Managers encounter with enterprise products alone and
it is not applicable for consumer products is that enterprise customers’ are resistant to
frequent product upgrades because of CAPEX (Capital Expense) and OPEX (Operating
Expense), they tend to use a product for a longer period of 3-5 years (especially on-

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premise products). On the contrary, business models of most consumer products rely on
frequent product upgrades. There is no benefit in stacking all the value in a single product
and making customers stick to a consumer product for 3-5 years. The duration for moving
target of needs or problems of enterprise customers just shifts from product launch to
eclipse the entire duration of the product lifecycle.
Product Manager should anticipate customers’ needs or problems as a function of time
across the entire duration of the product lifecycle. Customer insights combined with
extensive knowledge of how markets evolve, how technologies evolve, and how
customers’ behaviors change should provide an estimation of how customers’ needs or
problems change as a function of time and what new outcomes are possible. For certain
enterprise products, addressing customers’ needs or problems as they evolve is not
entirely possible without building a product architecture or a platform that can scale. I
was once managing an HW product used by ISPs (Internet Service Providers) for defining
policies of their internet users. During the launch of the product, internet speeds offered
to each user was low. However, the internet speeds offered to each user raised
exponentially in few years and the product could not meet the new requirement resulting
in the early retirement of the product (or rather the product has to retire prematurely).
In the enterprise segment, we tend to face a similar problem with complex SW products
as well and refactoring the architecture can help but it will be costlier. Even so, refactoring
the entire HW or product architecture takes time and there is a risk of not being able to
address evolving needs or problems in a timely manner. When the only thing that is
certain about future is uncertainty, a question that stares at every Product Manager is
how much to scale and when? The eBook captures my experiences for addressing those
challenges and providing structured guidelines for building great enterprise products that
can scale for future needs.
My experiences
We often learn by doing. Every journey or endeavor teach us back something, they part
us with some memories and experiences to ponder because perfection and flawlessness
are elusive. The eBook is a reflection of my experiences and learnings learned through
hard way of building the new product and introspecting upon failures and experiences
encountered during new product development. Through elaborating my experiences of
building the new product in this eBook, I have structured actionable plans across various
phases of product development for successfully building great products that are:

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1. Built on a foundation of strong product vision that defines the purpose and
objective behind the new product.
2. Built to address real needs of real customers and as desired by those real
customers.
3. Built not just for needs of today but also for needs of tomorrow and in alignment
with the evolution of technology trends, market trends, and changing customer
needs and their behaviors.
4. Built with all essential attributes that will drive customer preferences towards the
new product.
5. Built through meticulous planning, impeccable execution, relentless attention to
details, and zero-tolerance to mediocrity.
The actionable insights presented throughout this entire eBook will reinforce the above
five key tenets for building great products. The eBook talks about new product
development from the perspective of a Product Manager. Therefore, I consciously
focused on activities exclusively performed by Product Manager during various stages of
new product development. This is not a book about product development methodologies
and therefore there is no focus on any specific methodology (including agile). A quick look
at various topics of this eBook might throw an idea that we followed waterfall model for
product development. However, it is not the case, we never really followed waterfall or
agile. Instead, we integrated both the models. We adopted a newer development
methodology, as pure agile or pure waterfall did not fit us. I did delve into more such
unique practices that we followed during new product development in this eBook in a
separate section called ‘What did we do differently’. I also attempted to intertwine those
experiences throughout this eBook.
I want this eBook to remain as a guiding force in providing actionable insights for building
enterprise products. I have learned about Product Management by reading books, blogs,
articles etc. and primarily through my role as a Product Manager. The eBook is a way of
giving back to my fraternity through sharing my experiences. I would be humbled if
someone finds it useful and I am open to comments to make it better. The information
shared in this eBook is already available in my blog @ www.ProductGuy.in. I appreciate if
you could visit my blog and drop your thoughts and comments. If you like the eBook,
please help spread the word about this eBook.

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A copy of the eBook is downloadable from www.ProductGuy.in/eBooks/
Happy Reading!!!
Murali Erraguntala
LinkedIn| Slideshare| Twitter| Blog| Email
The eBook is still WIP (Work In Progress) attempting to prepare some better framework
on how to identify evolving needs or problems and ascertain how technology
advancements can lead to new outcomes. If you have any thoughts or if this subjects
interests you, please reach me for further collaboration.

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Building enterprise products – My experiences
New product development process consists of various stages (ideation, business review,
understanding and discovering needs, product development planning, product
development, and finally product launch). I tried to focus on activities performed by a
Product Manager in each of those stages while strictly adhering to the five tenets of
building great products that I had mentioned earlier. In addition, I have also focused on
an additional stage called monitoring plan, which is mostly a forgotten item in new
product development. Monitor plan is to assess what business drivers and external
factors cause customer needs or problems to evolve. Later, monitor how they could
possibly alter the landscape of customers’ needs or problems during the entire duration
of product lifecycle. With advancements in technology, outcomes to address evolving
needs or problems too vary and monitor plan will capture the probability of how
outcomes could change, accordingly ensure that the new product is ready for delivering
those outcomes. Building a new product falls into two categories (i) building a new
product belonging to a new category and (ii) building a new product belonging to an
existing category. The major difference is that in the latter scenario target customers are
mostly existing customers, so validating new product idea, understanding and discovering
needs, deriving the potential size of the addressable market would be little easier and less
risky. In the former scenario, Product Manager should extensively validate the new
product idea. I recommend validating the new product idea based on the following three
parameters.
 Problem-solution fit - Does the product idea address the right need and address it
right?
 Product-market fit - Does the product to be built is targeting the right market?
 Profitability - Is their sizable audience among target segment to make sufficient
margin?
Along those three parameters, Product Manager should also identify whether the timing
is right for developing the new product. I have elaborated all those aspects in the later
section called ‘Idea Validation’.
Primarily, the task of a Product Manager in new product development is to either
conceptualize or facilitate conceptualization of new product idea that shapes the future.
Later provide convincing reasons that the new product idea is viable financially, would
add significant value to customers, fits within the overall strategy of the organization and

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contribute to increasing the bottom-line of the Organization. In spite of successful
validation of new product ideas, not all product ideas transition into full-fledged products.
During product development phase because of inappropriate planning, wrong estimation
of product development cost, incorrect assessment of market and customer needs,
unsuccessful integration of latest technology, or change in priorities of the Organization
etc., some ideas are abandoned mid-way. Yet, some new product ideas reach the finish
line and transition into full-fledged products through successful launch only to be devoid
of commercial success. While new product development is exciting, it offers many
challenges to all stakeholders involved (especially to Product Managers). Therefore,
Product Managers could not afford to lose attention during any stage of product
development and should exhibit relentless attention to details with an extreme focus on
ensuring commercial success of the new product.
I have formulated queries for each phase of new product development to provide
actionable insights. Product Manager can leverage queries to obtain a holistic view of all
activities undertaken during each phase of new product development to avoid failures
and possible slips. The approach outlined perfectly works irrespective of whether it is an
HW (Hardware) or SW (Software) product. Queries can stimulate thinking. Queries can
also act as a checklist and can provide directions and guidelines for Product Manager to
meticulous plan new product development and impeccably launch the new product to
resounding commercial success. The checklist is a proven methodology to avoid slips by
Product Manager during new product development by explicitly pushing Product
Manager to ponder over every aspect of new product development. A strong foundation
of understanding the needs or problems of customers, their business environment and
drivers triggering needs as of today will help Product Managers expand their horizon into
future. The initial phases of product development focus on building that strong
foundation. Otherwise, subsequent efforts of Product Managers to comprehend future
by connecting it to the present and the past will be a complete fiasco.

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Problem discovery to idea validation
The journey to building a great product that customers love starts with identifying a right
problem. Product Managers should be problem seekers to discover problems or needs
that customers encounter in their business. The discovery process involves developing an
empathy with customers to understand their business, needs or problems that their
business foresee in the near and long-term, and what drivers or factors are triggering
those problems. How customers are handling those existing problems, what alternate
outcomes are most desirable to address those problems. Product Managers should rely
on both what they hear and what they see to develop a mental map of all the problems
or needs that customers encounter, how they are addressing them currently, and what is
causing those needs or problems. Product Managers should spend time refining the
problem statement and prioritizing which problems to address. When the focus is on
identifying right problem, conceptualizing a solution to address that problem will result
in a great product that customers want.
Figure 2 - Problem focus
On the contrary, the journey to building products triggers with an idea. An idea often
evokes the feeling of a solution and not the actual problem. Ideas are everywhere and we
hear them every day – An idea that can disrupt the entire market, an idea that can sweep
customers of their feet, and an idea that can displace all competitors. Seldom have those
Problem Solution

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ideas had a backing of right problems. Most ideas give rise to a problem statement rather
than being born out of a problem statement. Such ideas try hard to map to a problem
that might not be a real problem. Further confirmation bias will shield a Product Manager
from seeing the reality. Never start the journey of building a product with an idea, start
with a problem and get married to the problem, so you will strive to create a right solution
for the right problem.
Figure 3 - Solution focus
Measure desperation index
I am borrowing Maslow hierarchy of needs framework to understand the priority of the
need or problem that Product Manager chose to address. Maslow defined the hierarchy
of needs for human beings. The hierarchy defines needs in a pyramid structure where the
needs at the bottom are the most important needs. Human beings meet those needs first
before proceeding to other needs in the hierarchy. For human beings, food, shelter,
clothing, financial security, and love forms the basic needs. Probably communication
comes next in Internet era. Without meeting those needs, human beings do not normally
attend to other needs in the hierarchy, probably buying a car. While validating the new
product idea, especially in a B2B segment, Product Manager has to define a similar
hierarchy of needs for a B2B customer segment.
Solution Problem

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The B2B customer segment has lots of needs primary among them being profitability,
shareholder relationship, employee connect, social responsibility etc. In order to fulfill
those needs directly or indirectly and ensure continuity in business, B2B customers buy
products for office automation, payroll, email communication, sales and leads tracking,
collaboration, connectivity, data center etc. Product Manager has to identify all those
needs and define a hierarchy of those needs. Later should ascertain the level at which the
need addressed by the new product idea is positioned. Customers, while expressing their
willingness and affordability to buy the new product will respond in isolation without
dwelling too much into their buying economics. However, when customers either allocate
or estimate budget for actual purchases, they will prefer buying products at the bottom
of the pyramid and will go upwards to satisfy other needs. Product Manager has to ensure
that B2B customers’ budget does not dry before reaching the level marked by the
positioning of the need addressed by the new product. If a majority of customers could
not reach that level, then the new product hardly stands any chance for survival. Product
Manager might have to either strategize to push the need towards the bottom of the
pyramid by articulating the value that the new product could bring to customers’ business
or gracefully discard the idea of building the new product. Either way, Product Manager
has to consciously identify where in the hierarchy, does the need addressed by the new
product is positioned and ascertain whether the new product has any chance of survival.
Hierarchy of needs will indicate the desperation index of customers to satisfy the need
addressed by the new product in relation to their other existing needs. Customers will
start buying products in the descending order of desperation index. The product that
addresses needs with higher desperation index is at the top of customer purchase list.
Purchase list will contain an exhaustive list of products that customers purchase to
address their entire business needs.
Seth Godin has proposed the below pyramid for the hierarchy of needs for B2B sales. I
am providing it as a reference for Product Manager to define their own hierarchy of needs
based on their understanding of their B2B customers’ needs. It is essential to identify an
Hierarchy of needs will provide a desperation
index of customers to satisfy the need addressed
by the new product in relation to their other
existing needs

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exhaustive list of needs that are on the purchase list of target customers and organize
them in the pyramid in accordance with the desperation index of target customers for
each need. After constructing the pyramid, Product Manager could validate it by
observing purchasing patterns of customers. Purchasing patterns of not specific products
but entire products in the purchase list. Pyramid should now provide the list of needs that
are at the top of customers’ priority list.
Figure 4 - Hierarchy of Needs2
The presence of need addressed by the new product at the bottom of the pyramid does
not essentially guarantee success. It will only provide an opportunity for survival. Whereas
survival will further depend upon how efficiently the new product is addressing the need.
In addition, effective positioning of the new product among target customers, prudent
pricing of the new product and optimal ways of selling the new product will also
determine the survival instincts of the new product. Formulating a pyramid outlining the
entire hierarchy of needs and later identifying the layer in which the need addressed by
the new product is positioned can also help Product Manager ascertain the impact to
sales during a recession and financial slowdown. Especially during those tough times
2
Source: http://ganador.com.au/retailsmart/2012/6/19/b2b-hierarchy-of-needs.html
Source: http://sethgodin.typepad.com/seths_blog/2012/05/a-hierarchy-of-business-to-business-needs.html

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when customers drastically cut the budget, using the pyramid of the hierarchy of needs,
Product Manager can easily identify what needs do customers might be willing to forego.
Desperation index provides an indication of what needs are important to customers.
Nevertheless, there is no hard and fast rule for always picking needs at the top of the
priority list.
Idea validation
Building a product is like a weaving a story about how the product will bridge the gaps
between current outcomes and desired outcomes for the problems that the new product
will address. Idea validation is about collecting evidence to check whether we have
chosen the right problem, whether the outcome is most desirable to customers, and
whether the idea meet a viable business model for creating a sustainable business.
I recommend validating all generated ideas based on three parameters3
.
(i) Desirability - Do customers desire the new product to address their existing
needs or problems. Does the product deliver best possible outcome
(ii) Viability - Do customers be willing or can afford to pay to solve their needs or
problems? Is there a sizeable market for business viability? Do the new product
meets a viable business model?
(iii) Feasibility - Is it technically feasible to build the new product that will optimally
address customer needs or problems? Does the Organization has required
competence to build and market the new product?
There is a fourth parameter to idea validation that most of us miss is timing – WHY NOW?
WHY NOT EARLIER? Along with validating the idea on the parameters of desirability,
viability, and feasibility, Product Manager has to validate WHY IT IS NOW THE RIGHT TIME
to transition the idea into a full-fledged product. Understanding WHY NOW is critical to
ensure that the new product is neither too early nor too late to the market.
3
Desirability, Viability and Feasibility was elaborated by Tim Brown in his book ‘Change by Design’
Understanding ‘WHY NOW’ is critical to ensure
that the new product is neither too early nor too
late to the market

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Timing new product – Why now?
During validation phase of the new product idea, the larger discussion that needs wider
attention is to figure out the right time to start new product development or the focus is
more towards understanding why it is now the right time to develop the new product.
Timing is one of the most crucial factors that determine success or failure of the new
product. Product Manager, therefore, has to answer the most pertinent question – WHY
NOW? Why it is now the right time to translate the idea into a full-fledged product, so
(s)he can ensure that the new product is not too early or too late to the market.
Discussions about timing are not very critical if the idea
is fulfilling an already existing need addressed partially
or fully by competitors’ products successfully. In such a
scenario, the focus should be more on ‘How Differently’
is the idea addressing a need. When Mark Zuckerberg
created Facebook, MySpace and other social sites are
already in existence. MySpace was famous at that point
in time. Therefore, the question would have been how
differently Mark should build Facebook to succeed
against competitors. I am not sure whether Mark
Zuckerberg has done any competitor analysis and it is
not significant for this discussion. What is important is
that timing factor might not be pertinent for ideas that
competitors have already addressed.
Any idea can address two broader categories of needs
i) Dormant Need – These needs are in existence since a longtime but unaddressed
so far. However, the recent improvements in technology or increase in economic
status of the population or existence of any other factors would have made it
either feasible or viable to address the need. Customers can be either aware of a
dormant need or they might not recognize it.
ii) Emergent Need – There are needs that have emerged or will emerge because of
the existence of certain drivers.

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Therefore, for any Product Manager to effectively respond to WHY NOW? I am
fundamentally relying on two parameters
 What changes in technology, socio, economic or any other related factors make it
either feasible or viable to address a dormant need?
 What are the drivers triggering an emergent need or rather what drivers will
germinate a need in future?
Dormant need
Under the context of dormant need, let us look back at history to comprehend why digital
photography become familiar in early 2000 while the invention of the first digital camera
happened in 1975. While neural networks have been a familiar topic for 60 years, how
could someone explain the sudden emergence of products related to artificial intelligence
and machine learning only during last few years? I would loathe admitting that the use-
cases emerged only now. Use-cases were in existence and relevant all these years, but
why those technologies took decades to emerge after it was first introduced. The answers
remain in certain factors that have facilitated those technologies to flourish decades after
they were first conceptualized. The focus of evaluating why now is to discover and
understand those factors that are capable of creating a conducive environment to address
dormant needs.
Identify drivers making it feasible or viable to address a dormant need
 Improvement in GPUs as outlined by Moore’s law has provided necessary
processing power required to build intelligent AI systems. Those AI systems are now
capable of processing more data and providing meaningful insights to further act.
Availability of IoT, sensor devices, social network sites etc. have facilitated
generation of more data. While evolution in big data systems has made it possible
to store and model structured, unstructured and semi-structured data of various
formats at higher volume and velocity while ensuring the veracity of the data.
 Availability of reliable sensors has paved way for lots of IoT (Internet of Things) use-
cases such as smart parking, intelligent health monitoring etc.
 When it was not financially viable for banks to establish branches in rural areas,
the emergence of mobile banking extended the reach of banking services to rural
people at an affordable cost e.g. mPesa4
.
4
Source: http://www.vodafone.com/content/index/what/m-pesa.html

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 E-commerce enabled the possibility of selling less of more niche products5
profitably. Chris Anderson coined the term long tail for the business model of selling
less of more. Further E-commerce facilitated the creation of a marketplace to bring
buyers and suppliers much closer than ever before.
A closer look at the above examples will clearly indicate that there were always needs to
be fulfilled. E-commerce has facilitated to bridge the gap between suppliers and
consumers bringing them more closely than ever before. With the increase in a number
of cars, parking was always a hustle in most of the big cities; IoT has facilitated the
possibility of a smart parking system. Rural population always had banking needs to either
receive money from their wards living in faraway cities or borrow money for their farming
activities. Only mobile banking has made it feasible to extend the banking services to the
rural population.
Emergent need
In this scenario, identify jobs, products, or services that did not exist 10 years ago. How
would someone explain the sudden emergence of new products or services had it not
been for the existence of any dependent drivers? The emergence of new disruptive
technologies always spawns new needs. They create a new wave spawning new allied
products or services.
 The rise in smartphones has generated the need for Apps.
 The increase in demand for sharing and uploading videos has created a need for
better video optimization techniques for better transmission of videos over IP
networks.
 The proliferation of more network-connected devices has spurred the need for
additional addresses, resulting in the creation of IPv6 addresses.
 Had it not been for the availability of high-speed internet connectivity and
proliferation of handheld digital devices to take high-quality videos, YouTube would
not be successful.
 Increase in population of elderly people by a factor of 2X in the US by 2030 will
definitely create the need for old age-friendly products or services.
5
Chris Anderson has elaborated about the concept of selling less of more in his book ‘The Long Tail’.

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Technology need not be the only factor contributing to emergent needs. Regulation and
economic status can also contribute to emerging needs
 Demonetization and government push for digital economy to create a cashless
society in India will lead to emergence of new products in financial technology
 Increase in demand for more energy and inability to meet those demands would
spur the need for technologies to create alternative energy and energy-efficient
products.
 Depletion of potable water would create the need to derive reliable alternate
sources of potable water
 The increase in per capita income increases the spending power of consumers
thereby providing an enormous business opportunity to offer irresistible services or
products. Per capita income is a critical factor to watch while launching expensive
goods of services.
Product Manager has to identify whether need addressed by the new product idea is
dormant or emergent. Accordingly, Product Manager should evaluate whether an
environment is conducive to build the new product and whether it is now the right time
to start productizing the idea. If timing is inappropriate, then there should be a possibility
for an Organization to preserve the idea instead of discarding it. Product Manager should
reincarnate the idea when an environment is conducive for it to prosper.
Evaluating timing of the new product idea will provide enough evidence that problems or
needs do exist and it will provide sufficient indications of what factors are driving needs
or problems or what factors are trigger new outcomes (mobile banking – old needs but
new outcomes). The analysis that Product Managers do while evaluating timing factor
and shreds of evidences that they collect will be right indicators to predict the future for
determining how needs, problems, and outcomes evolve or vary across the entire
duration of product lifecycle.
Outcome thinking
Outcome thinking is not being aware of what the product delivers but being aware of
what target customers accomplish with the new product. Outcome thinking glues Product
Manager to the problem and not to the solution. It is essential to imbibe outcome thinking
during validation of new product idea to ensure that the idea is indeed delivering the
outcome desired by target customers.

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Did you ever wonder why smartphones are hurting gum sales? What is the connection
between those seemingly unrelated products? Those products are in relation to the
outcome that they deliver. Customers buy gum to eradicate boredom and with the
emergence of smartphones, there was never a scope for boredom leading to declining of
gum sales. The outcome thinking has suddenly provided a new revelation that gums are
competing with smartphones to deliver an outcome i.e. eradicating boredom.
Figure 5 - Problem focus
My tryst with outcome thinking started with a milkshake example that Christensen
Clayton outlined as part of his jobs-to-be-done framework. It appears that people bought
milkshake because it helped them tide over a long and boring drive. Suddenly, the
competitors to milkshake are not just any other drink or food but just about anything,
that can help customers tide over a long and boring drive. Outcome thinking changes the
entire perception of perceived alternatives. Outcome thinking facilitates Product
Manager to stay married to the problem and not to the solution. When Product Manager
remain married to the problem (long and boring drive) and not to the solution
(milkshake), they could constantly think of better solutions through enhancing existing
product (incremental changes to milkshake – make it thicker or provide in large
quantities) or introducing a new product. Doing so, we keep continuously churning out
great product beating inflection points.
Outcome thinking facilitates Product Manager to
stay married to the problem and not to the
solution
Problem Solution
Outcome

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Focus now shifts away from solution or idea to an outcome. Solutions or ideas are means
to deliver the outcome. Outcome thinking always glues Product Manager to focus on
what customer intended to accomplish with the product. Solutions or ideas will always
be a by-product of outcome thinking. Outcome thinking is a cornerstone for validating
ideas and evaluating how idea delivers better outcomes than existing alternatives. From
the perspective of alternatives that customers use to accomplish an outcome, Product
Manager has to evaluate whether there is sufficient incentive for customers to migrate
to newer outcomes and what would hold them to maintain a status quo. Are there any
costs that customer might incur for migrating to newer outcomes. Product Manager has
to evaluate both cost and incentives to understand the willingness and ability of
prospective customers to embrace newer outcomes.
Current Outcome
 What is the current
outcome
Alternate Products
 List all alternate products
that customer use to
accomplish the outcome.
Incentives
 What is the push for
customers to migrate to
new outcome
New Outcome
 What is the new
outcome, how is it
different from old
outcome
New Product
 What is the new product
Cost
 Is there any cost that
customers incur to
migrate to a new
outcome.
 Identify what pulls
customers to remain with
status quo.
Customer Needs or Problems
In our earlier example, tide over a long and boring drive is a customer need or problem
while milkshake is an outcome. Outcomes are manifestation of solutions
Push
Pull

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Product-Market fit - Desirability
While talking about timing, I was focusing on a set of drivers that (i) make it feasible or
viable to address a dormant need or (ii) generate a new emergent need. The focus was
on factors independent of customers that can be conducive for an idea to flourish into a
full-fledged product. Whereas the purpose of establishing product-market fit is to validate
the following critical aspects that are crucial for success of the new product
1. Whether there is a genuine need?
2. Can the product idea address a need?
3. Whether the new product idea can address a need as desired by customers?
4. Is it the right product idea for the right market?
Product Manager has to establish product-market fit even before contemplating the
possibility of developing the idea into a full-fledged product. Evaluation of product-
market fit will ensure that there is a market with the existence of real needs and the new
product will satisfy those genuine needs of the market in accordance with expectations
of the market. In addition to evaluating the veracity of a need in case of both B2B
(Business to Business) and B2C (Business to Consumer) products, there is also a necessity
to evaluate whether the new product is built for the right market in a way that the market
will readily embrace the new product.
.
Is the need real?
Product Manager could ascertain the reality of dormant need by identifying the positive
impact brought to the lives of customers by addressing the need or rather by ascertaining
the adverse impact of not addressing the need. For the need not recognized by
customers, Product Manager could still anticipate the impact of addressing the need and
communicate it back to customers in a way that they get excited about how their lives
could get better. For instance, not many customers understand the concept of ‘SMART
HOMES’ and even governments are ignorant about the concept of ‘SMART CITIES’.
‘SMART CITIES’ is not just about smart parking. In both the cases, I do not foresee any
difficulty in helping customers understand the value rendered by any product towards
In addition to evaluating veracity of a need,
there is also necessity to evaluate whether the
new product is built for the right market in a way
that the market will readily embrace it

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accomplishing the value of ‘SMART HOMES’ and ‘SMART CITIES’. The challenge with
dormant need might not remain in establishing the reality of the need but in evaluating
feasibility and viability of addressing the need. Later sections of this eBook elaborate on
topics related to feasibility and viability of the new product.
In certain cases, mostly related to emergent needs, customers cannot vouch whether
there is a real need. In such scenarios, the drivers that I had indicated in the section about
‘Timing of the new product’ establish existence or emergence of real need. The existence
of drivers causing the need could be a source of truth for the existence of a real need. So
in order to establish the existence of a real need, Product Manager has to establish the
existence of drivers causing the need. Identifying a trend of increase in billionaires in a
developing country can signal the genuine demand for luxury cars. Accordingly,
manufacturers of luxury cars like Rolls Royse, Maserati, and Bentley etc. can open shops
to sell their products. Identifying the trend of increase in devices generating and
consuming more data and migration of applications to the cloud can signal the need for
high bandwidth connections. Simultaneously, increasing trend of internet usage and
increasing trend of cloud-hosted applications also validate the need for high bandwidth
connections. Those trends should signal network giants like Cisco to either invest in high-
end routers or alternatively build products to optimize the usage of internet traffic using
innovative techniques. Identifying and establishing drivers causing the need can also
indirectly indicate the impact of not addressing the need. In accordance with discussions
until now, I have dropped a checklist to validate genuineness of the need.
 What are the drivers causing the need? Is there a trend?
 Do customers really care if the new product is addressing their need?
 Does the absence of the new product adversely affect customers?
 Does addressing the need significantly improve lives or businesses of customers?
Does it do so by i) enhancing experiences, ii) saving time, iii) cutting costs, iv)
facilitating operational excellence or v) helping customers generate revenue?
Will the product idea address the need or deliver the desired outcome?
Once the reality of the need is established, next step is to identify whether the product
idea is addressing the need. To do so, it might not be sufficient to identify the existence
of the need but should go beyond to identify what causes the actual need. There might
be a need for online purchase of goods, to better address the need it is always essential
to identify why customers are willing to purchase goods online. Efforts that Product
Manager took earlier to identify the existence of the need, to understand drivers causing

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the need, and to understand consequences of not addressing the need can help identify
the outcome intended by customers. Often a new product can address multiple
outcomes. Customers use a smartphone for audio/video calling, taking photographs,
chatting, navigation etc. While building the new product, Product Manager has to identify
all possible outcomes and categorize them into the core and allied outcomes. Customers
really care if the product idea helps them accomplish core outcomes. Delivering allied
outcomes alone does not help win customers. The answer to whether the product is
addressing the need lay in the ability of Product Manager to identify whether the new
product idea will help customer accomplish core outcomes.
Core outcomes and allied outcomes are synonymous with needs vs wants. Customers
would consider the new product only if it is addressing their needs and attempts to
address wants should be an afterthought. Addressing wants might provide an edge.
However, it will not be the reason to drive customer preferences towards the new
product. To understand core outcomes, identify customers’ needs and customers’ wants.
Product Manager should be able to differentiate the underlying problems or pain points
that the new product will address into needs and wants. Customer will pay for the new
product only if it addresses their needs, addressing wants is always optional. However, as
the new product evolves and once all the needs are satisfied, the product should start
addressing wants to drive customer preferences towards the product.
Figure 6 - Problem-Solution Fit
Will the product idea be desirable for customers?
Apart from validating the reality of the need and identifying whether the product idea can
indeed address the need, there is also a necessity to understand whether the new product
will meet the needs in accordance with the aspirations of a market. While building the
new product, the focus should not be purely on addressing the need but also on how the
new product is addressing the need. Does the new product address the need as per the
expectations of a market? MVP (Minimum Viable Product), prototypes, mock-up screens,

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or video presentations go a long way in evaluating whether the workflow of the new
product to address the need is in alignment with expectations of the market. The focus
should also be on design especially while building products under the new category (for
instance building first home automation and first shopping trolley). In those cases, there
should be lots of emphasis on design to ensure usability of the product without altering
customers’ behaviors. Any product that demands change in customers’ behaviors might
not get appropriate acceptance from customers in spite of precisely addressing their
needs.
Right product for right market
Identifying the right market for the right product is an exploration process to find a perfect
match between product capabilities and market needs. If Product Manager either fails to
build the right product or fails to identify the right market, then it is a colossal failure.
While validating the authenticity of the need, Product Manager can identify the target
market for whom addressing the need is crucial. Even if the new product is average,
positioning it to the right market will put the new product on the path to tremendous
success. Market with genuine need will always pull the right product.
Identifying product-market fit is a continuous process even after rolling out version 1.0 of
the new product. Continuously evaluating the fit will help evolve the product in
accordance with changing customers’ needs and their behaviors. Understanding buying
process and understanding how customers make their buying decision will help Product
Manager corroborate the existence of the fit and take appropriate corrective measures
post the FCS (First Customer Shipment). I drafted an eBook on ‘Comprehending Customer
Buying Process’ that precisely outlines a framework to identify how customers make a
buying decision and what factors would drive their preferences towards the product. The
downloadable copy is available at www.ProductGuy.in/eBooks.
Figure 7 - Product-Market Fit

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Product traction, increase in the pull through rate of customer inquiries, increase in sales
especially from existing customers, reduction in the cost of acquiring new customers,
positive feedback, increase in conversion rate from free trial to paid customers and more
product requests etc. will clearly indicate to Product Manager that product-market fit was
reached. Nevertheless, the other real indicator of reaching product-market fit is when
customers start exclaiming that is the product for me.
Evaluate product-market fit
Product Manager should always look out for both quantitative and qualitative ways to
ascertain the authenticity of the need. Product Manager should establish the authenticity
of the need without any iota of doubt in multiple ways through reliable methodologies.
Some people insist that Product Manager is wasting too much time validating the
existence of the need. They might persuade engineering team to proceed with
development of the new product with lots of assumptions about the existence of the
need. To all those critics, I could only insist that efforts put towards validating the need
will offset by faster development cycles, as the need is now well known. There is a real
value in time spent on validation of the need.
You know if I had an hour to solve a problem
I'd spend 55 minutes thinking about the
problem and 5 minutes thinking about solutions.”
- Albert Einstein
After ascertaining the authenticity of the need, Product Manager has to evaluate whether
the new product would be desirable by customers to address their needs. Therefore, any
methodology to evaluate product-market fit should at least validate one of the following
premises.
1. Authenticity of the need
2. Ability of the new product to address the need
3. Ability of the new product to meet the need as desired by customers
The real indicator of reaching product-market fit
is when customers start exclaiming that is the
product for me

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I did try to elaborate few methodologies based on my experiences, but those are not the
only available methodologies. Loads of creativity is definitely required to identify an
appropriate, efficient, and optimal methodology to evaluate product-market fit.
Look for signs
Looking out for signs is an appropriate methodology to ascertain the existence of
a need especially while addressing an emerging need. Product Manager has to spot
signs indicating the presence of drivers triggering the need. I have earlier talked
about an emergent need for luxury products (for instance cars) in developing
countries. What might be possible signs indicating the existence of the real need
for luxury cars – Quite obviously reliable reports indicating the rise of high net
worth individuals in a developing country along with confirmation of their
penchant for luxury goods is sufficient indication for companies like Bentley to sell
their cars in a developing country.
What signs indicate the need for a smart parking system? The Increase in a number
of cars and scarcity of available parking spaces forcing people needlessly circle
around in search of free parking space are sufficient indicators. Smart parking
might not be viable if there is an abundant space for parking.
There could also be signs indicating gaps with respect to existing product offerings.
Freshdesk (a customer support product) backed by prominent investors like
Google Capital, Accel Partners, and Tiger Global Management was formed by a
simple comment about dissatisfaction levels of customers with an incumbent
customer support product6
. Freshdesk identified the gap (or could I say ‘White
Spaces’) successfully emerging as a reliable alternate player in customer support
software.
Signs indicating the existence of a need are definitely ubiquitous but sources
signaling a need are well defined. Depending on the need, narrow down sources
to look for signs indicating an existence of the need. Looking out for signs indicating
a need is not mandatory as long as there is a confidence on part of the Product
Manager to generate demand for a need. In such a scenario, Product Manager
6
Source: http://blog.freshdesk.com/the-freshdesk-story-how-a-simple-comment-on-h-0/

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need not look for signs indicating the existence of a need, instead (s)he can validate
the existence of drivers that can be conducive to generate a demand for the need.
Share the idea
Robert Kennedy co-founder of MaxMyTV pitched the idea of Interactive TV at a
startup event in Pittsburgh in 20127
. Encouraged by positive responses from
attendees (including Andrew Moore, VP at Google) at the event, Robert Kennedy
began working on his product idea along with his other co-founders. Some
naysayers still insist on not sharing an idea with anyone citing that an idea would
be either stolen or ridiculed. The value of the idea lay in execution and not in the
idea. Instances as illustrated earlier only prove that there is lots of value in sharing
an idea. Nevertheless, sharing an idea at right forums to the right set of audience
to fetch feedback is far more effective especially if the idea belongs to a new
category like MaxMyTV. Every major city has startup forums that invite people to
share ideas. Augmenting such forums to get substantial feedback about an idea
even without any initial prototype would immensely help to validate new product
idea.
Scott Weiss, co-founder of IronPort (an email security company) did something
similar to validate his idea8
. Instead of pitching his idea in a startup event, he
handpicked industry experts and reached them through emails, cold calling etc. to
validate his idea and his analysis about email security market. IronPort later
established as a leading player in email security and Cisco acquired it in 2007.9
7
Source: http://yourstory.com/2014/09/maxmytv/
8
Source: http://blogs.wsj.com/accelerators/2014/10/20/scott-weiss-round-up-the-experts/
9
Source: https://en.wikipedia.org/wiki/IronPort
Signs indicating existence of a need are definitely
ubiquitous but sources signaling a need are well
defined.

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Prototype – Fake the product
The prototype can be a product concept, mockup, wireframe screens, video, or 3D
design of the new product idea to validate it among prospective customers. The
prototype is also a reliable alternative to secure funding and further expand the
idea into a full-fledged product. The prototype is required if the idea is entirely new
and prospective customers or VCs need something physical or visual to understand
what they can expect when the idea is converted into a full-fledged product. The
prototype is a cost-effective and proven mechanism to fake the new product and
to gather feedback to evaluate product-market fit before proceeding to build the
new product entirely.
The reason for prototyping purely depends on its purpose. If there is a purpose,
then purpose will dictate the need for a prototype and type of prototype as well.
If the purpose of a prototype is to evaluate the technical feasibility of the new
product idea, then investing on product concept makes sense. The Product
concept is a primitive way of building the new product to demonstrate the core
functionality sans any frills. If the idea is to validate how customers would react to
the new product idea, then mockup screens or video is an ideal option. On the
other hand, if the purpose is to validate product design with prospective
customers, then the 3D design of the new product is an ideal option.
Prototypes are required to evaluate the existence of a need and to seek feedback
about the efficacy of the new product idea in addressing the need from prospective
customers in a quick and dirty way. Prototypes can be as simple as creating a
landing page and investing in google online advertisements for internet product to
identify how many customers would express interest in the idea. Prototype
precedes development and business review phase. Therefore, it necessitates not
only completion of the prototype but also fulfilling the purpose behind prototype
before seeking funding and approval for the product idea.
It is really a revelation to hear some stories about how new product ideas are
validated with minimal effort. Dropbox founder validated his idea by building a
three-minute video10
.
10
Source: https://techcrunch.com/2011/10/19/dropbox-minimal-viable-product/

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Minimum viable product
MVP (minimum viable product) is one of the most familiar methodologies to
validate whether the new product is addressing a genuine need and whether it is
addressing the need as desired by customers. Product Manager can do so, by
evaluating behaviors of select few customers (aka early adaptors) while using MVP
version of the new product. Product Manager cannot complete development of
the new product with assumptions surrounding customers’ needs and their
behaviors. In the case of new product going beyond boundaries of existing product
categories, Product Manager might not be sure whether the new product is
actually addressing a genuine need. Even otherwise, Product Manager might not
be sure whether the proposed new product is in alignment with expectations of
customers. Conceptualization of the new product invariably starts with
assumptions involving customers’ needs and their behaviors. Product Manager
should outline an exhaustive list of assumptions around customer needs and how
customers will use the new product to address their needs. Later construct
hypotheses and identify methodologies to test them. MVP is one of the
methodologies to validate those hypotheses by explicitly measuring whether the
new product addresses customer needs and whether workflow of the new product
excites customers to use the new product. If assumptions involving either
customers’ needs or their behaviors are false, then Product Manager should pivot
new product development and should formulate an alternate hypothesis to
proceed further.
MVP can actually solve two purposes:
 Does the new product idea address a genuine need?
 Does the new product idea address the need as desired by customers?
It would be tough to build an MVP without outlining the exhaustive list of
assumptions or unknowns and without formulating the list of hypotheses to
validate those assumptions or unknowns. The objective of MVP is to identify what
to learn, accordingly build a minimum viable product that can help validate
assumptions or unknowns in a continuous cycle of build, measure and learn. The
motivation behind eliminating all unknowns and validating all assumptions will
form a baseline for what to learn. Based on the results of an iterative cycle of build,
measure and learn, Product Manager has to either preserve or pivot. I will focus

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more on it in product planning section. For business review, highlight the plans to
build an MVP and the purpose of building an MVP.
Prototype vs MVP
The prototype is a very primitive version of the new product in the form of video
or mock-up screens or product concept. On the contrary, MVP can be termed as a
trimmed version of fully conceived product with a basic set of functionalities
sufficient for early adaptors or early innovators to use it, validate it, and provide
feedback about it back to the product team. Product Manager might decide not to
sell MVP to customers but offer them MVP to gather feedback. I strongly feel that
the released version should be different from MVP. I would call released version
as Minimum Valuable Product. MVP and prototype can at times serve the same
purpose but the path that they undergo is drastically different. There is no hard
and fast rule to choose between MVP and prototype. However, the efficacy and
efficiency of respective methodologies will determine the choice between MVP
and prototype. I would generally recommend using prototype alone to validate the
existence of need because building prototype is quicker and validating existence
of need is fundamental for making any kind of progress. While I would recommend
MVP in the absence of any possibility of extending prototype for identifying
whether the new product is actually addressing the need that is most critical to
customers and whether it is addressing the need as desired by customers. Product
Manager has to target for completion of prototyping process for validating the
existence of need before the business review. The procedures to validate whether
the new product is addressing the need and whether it is addressing the need as
desired by customers can be done after business review. Highlight the plans (what
to validate) and appropriate methodologies (how to validate) during the business
review.
The efficacy and efficiency of respective
methodologies will determine the choice
between MVP and prototype

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Is MVP necessary?
MVP is definitely not mandatory. MVP is required only if there is a testable product
or market hypothesis to validate assumptions or unknowns. Zappos built a landing
page to test whether customers would buy shoes online. Once the fact that
customers are willing to buy shoes online is pretty much established, there would
not be a need for any competing products in similar space to test whether
customers would buy shoes online. What might be required is to test buying
behaviors of online customers for enhancing their shopping experience to an
entirely new level.
Firstly, identify whether there is a need for MVP. Unless Product Manager has clear
view on what to validate, how to validate, why to validate, (s)he cannot determine
whether MVP is actually required. If affirmative, Product Manager should be very
lucid on how the outcome of MVP would affect new product development. The
outcome of MVP should be binary resulting in either pivot or preserve. Product
Manager should have unconditional clarity in how the new product would evolve
in both the scenarios.
What is the ideal methodology?
There is no definitive answer, then how do Product Manager determine what the
ideal methodology is. Two things that are heavily scarce during new product
development are ‘TIME’ and ‘MONEY’. During the process of building the new
product and dedicating it to customers, the entire team will race against time to
bring the new product to market after thoroughly validating all assumptions and
eliminating all unknowns. Of course, there would not be too much money to burn
either. The ideal methodology depends on its capability to achieve the objective of
validating all assumptions and eliminating all unknowns consuming less TIME and
burning less MONEY. If there is more than one methodology, I will rather pick one
that can help achieve the objective in less TIME and with less MONEY irrespective
of the complexity of the methodology. In certain cases, where there is a conflict
between TIME and MONEY, I believe TIME takes higher precedence.

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Product feasibility
In addition to establishing the veracity of the need and ability of the new product to
address the need as per expectations of the market, Product Manager has to assess
whether building the new product as envisioned is feasible. In collaboration with architect
team, Product Manager has to ensure that there are no technical challenges and building
the new product as envisioned is possible and the new product will comply with all
required procedures (if any). During idea validation phase, a high-level evaluation of
technical feasibility to build the new product should suffice. Product prototype is an
appropriate way to validate the technical feasibility of building the new product. In the
presence of any technical challenges in building the new product, the existence of product
prototype would be a critical parameter to secure funding for the new product.
Feasibility is not only about evaluating technical feasibility but also about evaluating the
feasibility to build the new product as envisioned within acceptable cost structure and
timeline. Irrespective of the pricing model, Product Manager should always strive to keep
costs low while maximizing the value rendered by the new product. So evaluating the
ability to build the new product as envisioned, yet within the limits of acceptable cost
structure and without any possibility of schedule slip is essential.
Estimating market size
Identify target customers and estimate the total population of target customers, generally
called as TAM - Total Addressable Market and finally estimate how much of entire TAM
can the new product serve. Product Manager can use available statistical data or
guesstimates to estimate the TAM. The idea might have a global appeal but for some
strategic reasons, Product Manager might target local market first. Product Manager has
to outline which segment (based on demographics) of TAM is targeted first.
For instance, cloud-based education software to facilitate teaching on a dumb terminal is
a universal idea and it has global appeal. Nevertheless, Product Manager might focus on
local geo-market before expanding globally. In such case, Product Manager should initially
Feasibility is not only about evaluating technical
feasibility but also about evaluating the
feasibility to build the new product as envisioned
within acceptable cost structure and timeline

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pick the local geo-market as serviceable market and should figure out how many target
buyers within the serviceable market are potential customers (penetration rate) of the
new product. Product Manager should capture plans for expansion of total serviceable
market triggering the increase in the count of overall target buyers in the business plan.
The purpose is to indicate growth potential of the idea. The growth can arise by either
increasing penetration rate or total serviceable market or combination of both. The
business plan should reflect those plans at a high-level.
Figure 8 - Addressable Market vs Serviceable Market vs Target Buyers
Profitability – Viability
After estimating market size, Product Manager has to ascertain whether the size of the
target market is large enough to break-even and make margins. Firstly, understand
whether customers can afford to buy the new product and is willing to buy the new
product. Affordability and willingness are two different aspects. Target customers can
afford to buy the new product but there would be a lack of willingness unless they realize
the value of the new product. On the contrary, the customers might realize the value and
be willing to pay the price but they could not afford it. Therefore, it is essential to look at
both the factors (affordability and willingness). In a scenario of ‘Willingness’ without
‘Affordability’, it can open doors for a new low-cost product idea. Much of this space
Total Addressable Market
Total Serviceable Market
Target Buyers

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might fall under the category of ‘Fortune at bottom of the pyramid’11
conceived by C.K.
Prahlad12
. If customers are willing to buy the product and can afford to buy the product,
determine whether the size of the market is sufficiently big to make revenues based on
the estimated total addressable market, total serviceable market and penetration rate.
Simultaneously determine the cost of building the new product to calculate margins,
break-even period, ROI etc.
Organization fit
Product Manager should conclude the ideation phase trying to evaluate whether the new
product is in alignment with the Organizational goals and strategies. There is hardly any
chance for approving new product development without clearly establishing how the new
product would align with overall goals and strategies of the Organization. Next step is to
evaluate whether the Organization has the required capabilities and experiences to build,
launch, market and sell the new product.
Final Word: More often, an idea might evoke a “WOW” feeling among customers.
However, one should cautiously evaluate whether the sizable number of customers can
afford and ready to pay the price to experience the “WOW”. Remember Iridium! Even
though it was a great product idea (in spite of some technical glitches), a smaller chunk
of customers could only afford it.
11
Reference: https://en.wikipedia.org/wiki/The_Fortune_at_the_Bottom_of_the_Pyramid
12
Reference: https://en.wikipedia.org/wiki/C._K._Prahalad
Target customers can afford to buy the new
product but there would be lack of willingness
unless they realize the value of the new product.
On the contrary, target customers might realize
the value and be willing to pay the price but they
could not afford it

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Idea Validation Phase Checklist
Idea vs Customer Needs
 What is the new product idea?
 What are the most critical customer problems or needs that the new product
idea will address?
Why Now?
 Is it a dormant need?
o What are the drivers making it feasible to address the need?
 Is it an emergent need?
o What are the drivers triggering the need?
Product-Market fit - Desirability
 Is the need real?
o What are the drivers causing the need? Is there a trend?
o Do customers really care for the new product idea to address their
needs?
o Does absence of the new product adversely affect customers?
o Does addressing the need significantly improve lives or businesses of
customers?
 Does the new product idea address the need?
 Does the new product idea target the right market?
 Can the new product idea meet market expectations?
 Is the new product desirable by target customers?
Evaluate Product-Market fit
 Are there any signs indicating the existence of need?
 Are there any substantial gaps with existing products that signify the
existence of a need?
 Can Product Manager augment existing forums to get substantial feedback
on the new product idea?
 Is it possible to fake the new product to evaluate product-market fit?

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 Did Product Manager identified right methodologies (MVP, Prototype,
Looking for signs, Faking the product, Sharing the idea etc.) to evaluate
product-market fit
(Use at least 2 distinct approaches to measure evaluate product-market fit)
Profitability - Viability
 Who are target customers?
 Can target customers afford to buy the new product?
 Are target customers willing to buy the new product?
 What is the total market size?
 What is the serviceable market size?
 What is penetration rate (aka size of target buyers)?
 Is the market big enough to make sufficient margins and ensure business
viability?
Feasibility
 Can engineering team build the new product as envisioned?
o Is it technically feasible to build the new product?
o Is it possible to build the new product adhering to all the required
compliances?
o Can engineering team build the new product within acceptable cost
structure and timeline?
Organization fit
 Is the new product in alignment with goals and strategies of the
Organization?
 Does the Organization have the capabilities to build the new product?
 Can the Organization excel at creating value (building), communicating
value (marketing) and capturing value (selling)?
Hierarchy of needs
 Where in the hierarchy of needs, is the need address by the new product
positioned?
o Is the desperation index – low, medium or high?

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Business review
After formulation and validation of the new product idea, Product Manager has to start
drafting a strong business case that would highlight the need for the new product and
justify it financially by providing an appropriate ROI (Return on Investment). ROI alone
cannot be a deciding factor always if the new product is of strategic importance to retain
customers and cross-sell other products. In order to provide compelling reasons for senior
management to invest in the new product, I tried to draft queries that would provoke
thoughts for business justification, under four broader categories:
1. Market Analysis
a. What is the need?
b. What is the potential impact of not addressing the need and not building
the new product?
c. Who are target customers? Does the Organization has the capability to
reach the target segment?
d. What is the size of the total addressable market? What is the size of the
total serviceable market for version 1.0 of the new product? What is the
penetration rate? Is it a growing market?
e. Is the market attractive?
f. Are there any market hypotheses? What are the plans to validate them?
2. Product Analysis
a. What are the top three needs that the new product will address?
b. What is the solution? What are high-level specifications of the new product?
c. What are the defining attributes (USP – Unique Selling Point) of the new
product?
d. Can the new product have a profound impact on lives of target customers?
e. What is the platform strategy? Are we leveraging existing platform or
creating a newer platform?
f. What is the total cost incurred to develop the new product?
g. Make or buy decision?
h. Are we imbibing any new technology into the new product?
i. What is the release date for the new product?
j. What is the positioning of the current product in the product life cycle?
k. Are there any product hypotheses? What are the plans to validate them?

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3. Competitive Analysis
a. How does Product Manager position the new product against the
competition? What would be vectors of differentiation for the new
product?
b. What is the current positioning of competitors?
c. How could competitive landscape potentially change in future?
d. What is the unfair advantage?
4. Financial Analysis
a. What is ROI of the new product?
Product Manager has to start framing responses to the above queries to formulate the
business plan in the form of a word document or a power-point slide and present it to
senior management. It is a well-established fact that queries stimulate and streamline
thoughts, so wherever possible I would adapt the strategy of first formulating queries and
later try responding to them. Doing so, I also try to first position myself in the role of a
reviewer while drafting queries and understand what kind of information would
reviewers like to hear from Product Manager. Later I start responding to those queries.
Please note that business review is a collaborative effort along with account managers,
sales team, BDMs, engineering team, architect etc.
Market analysis
 What is the need?
Outline the exact need that the new product will address. There is always a
dilemma whether to start the review with a problem (i.e. need) or a solution. If the
need is well known and the solution is unique, I would suggest focusing on the
solution first. So start with product analysis. Otherwise, start with market analysis.
Use the analysis done during idea validation to elaborate the exact need and to
outline the findings that confirm the authenticity of the need.
 What is the potential impact of not addressing the need and not building the new
product?
Product Manager has to identify the adverse impact on lives of customers without
addressing the need. Analyzing the impact would help Product Manager
comprehend how much customers would really care for addressing the need.

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Not building the new product is not a zero-sum game, if it is an extension to an
existing product line. Product Manager has to outline both tangible and intangible
impact of not developing the new product to the Organization, so management is
aware of the consequences of such a decision. Firstly, outline the revenue impact
to the existing product line, customers do not invest on existing products if the
product line is not evolving. Secondly, determine the possibility of losing customers
on adjacent products as well and revenue impact thereof.
 Who are target customers? Does the Organization has the capability to reach the
target segment?
Product Manager has to identify the segment for whom addressing the need is
critical. Later identify whether Organization has the capability to capture that
segment. If the target segment is not the traditional customer base of the
Organization, then Product Manager needs to outline a plan to position the new
product effectively and sell it to the new market segment. In addition, outline the
exact personas of the target segment to determine the overall market size.
 What is the size of the total addressable market? What is the size of the total
serviceable market for version 1.0 of the new product? What is the penetration
rate? Is it a growing market?
Analysts can provide precise information on the overall size of the market and
growth potential of the market. If it is a growing market, what is the CAGR?
Growing market alone is not a sufficient reason to invest unless the new product
does not have all the required ingredients to capture the growth. Product analysis
will address unique capabilities of the new product that would garner the interest
of target market.
If there is no sufficient analysts’ data about the market size and the ability of the
market to grow, look for alternate ways (even though crude) to identify market
size and to establish growth potential of the market.
i. Use Google trends tool to identify how a trend is evolving based on keyword
search trends.
Not building the new product is not a zero-sum
game, if it is an extension to an existing product
line

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ii. For B2C products, after identifying the ideal target customer. Use the census
data provided by the governments of each country to determine the overall
size of target customers and at what rate they are growing.
iii. Alternately, use guestimates to determine the size of the market. For
instance, what is the total population traveling through a particular highway
– To estimate the TAM for the highway motel.
iv. For B2B products, use the existing customers’ data for new products
introduced to an existing category. For products added to a new category,
use perceived alternative products to estimate the market size. Sales data
of existing products along with the rate at which it is increasing should
provide Product Manager an estimate of the potential market growth in
future. Alternatively, establish cause and effect relationship between the
growth of existing products and the dependent factor(s). Increasing
adoption of smartphones and easy payment options (like Cash on Delivery)
has contributed to the growth of mobile e-commerce.
Do not entirely rely on analyst data. Ideally, Product Manager had to look at more
than one data point to authenticate the existence of a growing market. Doing so,
Product Manager can avoid false positives in evaluating the overall size of the
market and its growth potential.
It might not be pragmatic to target the overall addressable market initially, identify
the serviceable market targeted by version 1.0 of the new product. Probably, the
focus could be on specific geo market for focused marketing efforts to reap better
benefits.
 Is the market attractive?
Market attractiveness is not universal and it might vary with the overall size of the
Organization. For some Organizations, a $100M market might be attractive while
for other Organizations anything less than $1B is not attractive. Therefore,
understanding of Organization’s priorities and expectations is essential. There are
certain exceptions with respect to the new product addressing a trend, the initial
addressable or serviceable market will be abysmally LOW but it can have huge
potential in long term. In such cases, highlight the potential and provide strong
justification on why it is necessary to enter the market now with the new product
to realize the vast potential in long term.

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 Are there any market hypotheses? What are the plans to validate them?
Outline all possible assumptions (if any) related to market (growth, target segment
etc.), formulate a hypothesis to validate each assumption and finally suggest a
methodology that will be employed to test market hypotheses.
Product analysis
 What are the top three needs that the new product will address?
The new product can address many needs. However, during the business review,
Product Manager should unambiguously indicate the top three customer needs
that the new product will address. It would be worthy to provide some proof points
on why customers value those three needs most. Product Manager should outline
how the new product is addressing those top needs distinctly from competitors’
products as part of competitive analysis.
 What is the solution? What are the high-level specifications of the new product?
Product Manager has to describe how the new product will address the most
critical needs. Elaborate the solution as a workflow or using mockups. In addition,
describe the product specifications especially if the new product is an extension to
an existing product line, so everyone will get a fair idea of how the new product is
different from existing products. Providing product specifications is not mandatory
especially if the new product is addressing the needs of an emerging market with
lots of ambiguity where the exact set of product specifications will remain unclear
at least until validating hypotheses related to market, product, and solution.
 What are the defining attributes (USP – Unique Selling Point) of the new product?
Attributes are those elements of the new product that uniquely differentiates it
from competition. The attributes should be in alignment with product
differentiation outlined under ‘Competitive Analysis’. The defining attributes can
be as simple as one or more of the following
 Cost effective
 Best performance
 Feature packed
 Highly intuitive and
 User-friendly etc.

Building Enterprise Product - For Moving Targets of Customer Needs and Outcomes

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