Whether you’re a CEO of an established startup or an entrepreneur trying to release your initial product, odds are you’re thinking about the best product development strategy for bringing an innovative product to market.
Technology has created more productivity capacity than firms know what to do with. The question is no longer whether something CAN be created, but SHOULD it be created for the current market state? Can we build a sustainable business around this set of products and services? Will people adopt it? Does it solve a critical problem at scale?
From idea inception to product distribution, a good product development strategy ought to include continuous customer feedback to ensure your product team is on the path to creating something customers want and need.
When embarking on a new product development journey, it’s just like starting a startup – you’re creating something new under conditions of extreme uncertainty. Whether you’re a solopreneur or a CEO of a corporation, you’re penetrating the market to find a successful path to a sustainable business around your idea.
What is the best product development strategy?
Everything starts with a great product idea, you might think. But while a product idea is definitely a factor and can keep your team motivated in the months ahead, a good product development strategy is your path to success. That path often meanders, abruptly leads to cliffs, or sends you to dead ends.
There are post signs along the way that are often barely visible and easy to ignore. But if you pay enough attention, you can always adjust the strategy to keep you on the right path.
In a volatile and fast-paced current market, a product development strategy is no longer a rigid plan rigorously laid out after intensive research and market forecasting. It’s more like launching and guiding a rocket. You can’t simply pick a star, push a button and expect stellar results.
Every step of the way requires adjusting and calibration based on continuous market feedback.
Although unable to be defined through a simple formula and one-size-fits-all solution, the best product development strategy has a set of key principles that will nudge you in the right direction.
Think problem first, solution second
Those who do it the other way around are doomed to solving nonexistent problems. Instead of starting with a solution and then frantically searching for a problem to solve, identifying the problem and then designing your product around it is a more effective approach. Also, a clearly identified problem makes it easier to know your target market.
The best product development strategy is always focused on the problem and evolves as more information becomes available about the problem your target customer faces. Identifying the problem clearly allows you to organize your resources to construct the most optimal strategy for developing the solution.
Minimize the time-to-market
Defined as the time from conception of a new idea to release of the product to the marketplace, time-to-market is a key variable in any modern product development strategy. A short time-to-market allows for early feedback and quick testing.
It also yields higher returns on investment as shown in this chart by Strategy Business:
To gauge current market needs, the product must “hit the shelves” as soon as possible. It’s by no means a final product, but rather something that early adopters will gladly test – a minimum viable product. This yields early feedback and saves precious time and resources you would otherwise waste developing something your customers don’t want.
Minimum Viable Product
A successful product, whether intentionally or unintentionally, starts with a minimum viable product (MVP), which is a less expensive and more effective way to bring a new product to market. An MVP is a bare-bones version with basic features enough to get the attention of the customers and gauge their interest while setting the direction for further product development.
It’s by no means a beta version built for discovering more bugs and fine-tuning features and UI. The primary goal of an MVP is to test the hypotheses about market needs and validate the premise of a product. The feedback received from early adopters can be used to adjust the product vision and reconsider where to focus your development efforts. MVP is a great way to find the product-market fit.
By getting your product into the hands of customers faster, you can test your product hypothesis and gauge overall interest with minimal resources and development. Additionally, you can cull early adopters and convert them into product evangelists. The valuable feedback from early adopters can give ideas for expansions, upgrades, or even the inception of other products.
Besides learning about the product, market, and users, you can test pricing models and start driving revenue sooner.
A minimum viable product will help you further define your target market as early adopters start using your product with their behavior clearly reflected in the first batches of the analytics data. This in turn will help you to properly aim your marketing efforts and resources.
Iterating fast lets you accelerate the feedback loop and pivot frequently while minimizing the opportunity cost. This is necessary to avoid running out of runway space when launching a new product or innovating an existing one.
Fast iteration shortens the product development cycle and lets you collect customer feedback early while staying in line with the needs of your target audience. This will help you avoid veering off course and wasting your resources on building a great product that solves a nonexistent problem.
Iterating fast also means failing fast. While that might sound scary at first glance, it’s an effective way to navigate the volatile marketplace landscape. Instead of trying to get it right the first time, it’s better to take more shots at the target and find out what works with minimal losses.
This approach lets you isolate tiny changes and know exactly what is more in line with your target customer. Fast iteration yields smaller, but more frequent changes. Backed by frequent feedback, this makes for a well-calibrated strategy compass that continuously adjusts itself based on consistent feedback from early adopters.
Another advantage of fast iteration is working in small batches. This allows you to push items faster through the delivery pipeline and get more frequent market feedback. Changing many things simultaneously doesn’t provide sufficient information about the effect of each individual change. Ideally, each change should be linked to corresponding feedback from users. This provides an opportunity to zoom in and investigate each change and its corresponding effect.
Product Development Strategy Examples
Being the fastest-growing SaaS startup in history, Slack was not initially intended as the most popular communication tool. Early in the development, the company had a major pivot. Their original product was an online game called Glitch which failed soon after launching due to an insufficient number of users to sustain itself.
That’s when the company pivoted and decided to release their own communication tool that was already used internally for a couple of years. Their major strategic advantage was understanding how people used their app before unveiling it to the world. Even though Slack was launched in 2013, the tool was in active development for several years.
Created out of necessity and designed to solve their own problem of communicating between 4 different cities and 3 different time zones, “internal” Slack had been acting as an MVP with early adopters being its creators trying to effectively solve their own problem – the need for messaging, sharing files, searching message archives, and other features that IRC failed to provide.
Although Slack had served their small team well internally, scaling it to teams of 10 people or more was not that easy. The team took on the challenge! They began tweaking the existing features and refining the product through rapid iterations. Listening to their customers and adjusting accordingly, the company was able to pivot frequently, ensuring a continuous product-market fit.
Adding functionality on an ad hoc basis throughout thousands of iterations, the team had quickly evolved the app to be on a par with any full-fledged real-time communication tool. A short time-to-market accompanied with a multi-year head start on everybody else allowed Slack to get an early grip on customer feedback and the opportunity to test their hypothesis.
Due to the initial intention to build a tool for themselves, Slack’s team had a good leeway in experimenting and adding new features ad hoc. Without even realizing it, they were solving a problem that millions of people were already having. Slack had immense commercial potential. All that was left to do was to confirm the initial hypothesis with an MVP and Slack excelled at it.
Unlike many startups who focus their energy on scaling rapidly, Slack focused on growing steadily, making sure they serve their current customers well. Every new feedback was addressed immediately, yielding even more refinement and preparing the tool for larger teams consisting of hundreds of members. Tiny Speck, the original company behind Slack, was evolving its product based on how people were using it while actively expanding its user base and becoming the fastest growing SaaS company in history.
They did ALL of this without a million-dollar marketing campaign, a clever email strategy, or a pushy outbound sales team. It was all product-led growth powered by word of mouth.
Back in 1999, the idea of buying shoes online sounded crazy. But if it sounded crazy to consumers, imagine how much criticism did the founders of Zappos face with their unprecedented idea? To add to that, as the year 2000 was looming, people were petrified of the Y2K bug that promised to end the internet and the world altogether. Selling shoes online just didn’t sound lucrative at that point.
Unaffected by public opinion, Nick Swinmurn decided to put his vision to the test. Starting small with a simple yet credible-looking website that acted as an MVP, he visited several brick-and-mortar stores to snap photos of their footwear and post them online, purchasing shoes only after his customers completed online orders. Not a profitable or easily scalable technique, but a good way to prove the concept. It was important to confirm that people would in fact buy shoes online.
Sounds counterintuitive, doesn’t it? Nowadays shoes are usually cheaper online than in stores, but back then the online shoe market didn’t exist.
Gradually scaling and onboarding more stores, the company partnered with UPS to expedite the delivery process and by 2002 the company was processing 40,000 pairs per shift at their fulfillment center in Louisville, Kentucky. An insanely convenient 60-day return policy offered customers safe shopping experiences and hassle-free returns that were as convenient as conventional shopping. Carrying the shipping expenses both ways, Zappos was able to retain the customers longer, turning them into evangelists and learning from their valuable feedback.
Zappos’ customer-driven product development was focused on forming a completely new market. However, the company would have never launched if the founder didn’t quickly confirm his idea with a simple website and a manual fulfillment method that would never scale. A perfect example of relying on a minimum viable product to prove the concept and confirm the hypothesis.
The initial idea for Groupon spawned out of the founder’s frustration with sticky mobile phone contracts back in the 2000s. Looking for a way to leverage a large number of people’s collective bargaining power, Andrew Mason launched The Point – a web platform built to gather people with the help of social media to accomplish a goal. The platform was supposed to muster people for some cause or goal.
Unable to gain enough traction, the company pivoted around the idea of rounding up people to buy the same product to receive a group discount. After pivoting, the company focused entirely on group buying. Groupon was born.
In a quest for product-market fit, Groupon was initially launched as a WordPress blog and hosted on a subdomain to save money.
Groupon started posting daily to relate each new offer. Signing up for any of them would give you a free coupon. What a stealthy launch yet with a clear intention of generating revenue right off the bat. A perfect example of a bare-bones MVP designed to test the hypothesis that people would tolerate group buying.
Evolving the product and advertising local businesses for a limited time attracted more businesses without any fancy marketing campaigns on Groupon’s side. Groupon started running deals for larger businesses. The word had spread quickly making the customer base grow beyond the country and continent, opening up a new market space and creating new demand.
A few years down the road, Groupon pivoted again, focusing on user experience and more habitual use of their app. Moving away from initially successful discounted coupon vouchers toward a less discount-driven approach was a bold move that quickly acquired support in the space.
Groupon was able to evolve and always ensure its product-market fit by pivoting quickly and always fine-tuning its product for a better product-market fit.
Lurking around the corner ready to pounce at the main players in the stock photography space was a stock photo provider that started with just 10 photos from a local photographer.
Entering the market with an idea to compete with giant stock photography providers, Unsplash is a perfect example of an extremely fast time-to-market approach. It started as a free Tumblr blog using a $19 design theme. Stocking it with 10 high-resolution photos of a MacBook taken by a local photographer, the team was able to build their MVP in just three hours.
Then it was time to test their hypothesis by submitting their website to Hacker News. A few hours and 20,000 downloads later, they have voted the top story. In less than four months, they hit 1M downloads.
They weren’t rushing with scaling up or user acquisition campaigns, focusing on the product-market fit and understanding their target audience. Only a year later when Unsplash reached 1M downloads per month (with just 776 photos in total), did they decide to move off Tumblr to a custom website.
Also, such a vital feature as photo search arrived much later – almost two years after the launch. Until then, the only way to look for photos was by browsing categories.
So in summary, Unsplash launched quickly on Tumblr with a bare-bones product. They quickly found their audience and were able to identify early adopters. Adding new features on an ad hoc basis, they were able to evolve their platform to be adopted by larger audiences. Betting on their product and knowing their users, the company has strived in the stock photo space, always believing that making something useful is the best marketing there is
Stages to guide your product development strategy
From idea inception to product delivery and scaling, each stage of the product development strategy requires iterations. Some stages are critical while others can be skipped depending on your target market segment and product type. While this strategy template can be considered comprehensive, it shouldn’t be used as a cookie-cutter neglecting your industry and market specifics.
In a quest for new products, you might want to start with brainstorming for fresh ideas. Make it a judgment-free zone for yourself and your team.
Generating ideas and creatively bouncing them off of each other can help you leverage the synergy of a team environment which usually exponentially improves the creative process. Don’t reject any ideas just yet. Quantity, not quality! You’re after uncovering and exploring new angles and avenues.
Being a basic element of thought, an idea can give rise to a whole new dimension of thinking and nudge the entire team in a whole different direction. Everyone has his own thought cycle, but when two or more of those cross or come together in an apex, it often leads to innovative and crazy ideas, leading you to uncharted territory with great opportunities.
This is where you would want to question the obvious and challenge the norm with fresh and innovative, and perhaps unconventional ideas, which might lead to redefining existing solutions.
During this process, you’re sifting your ideas through several plausibility filters to determine which ones are likely to make it through. This is where you combine your own knowledge with specific market research to sift out those ideas that don’t align with your vision.
This is a delicate process as most ideas are never destined to see the light of day. But at the same time, you don’t want to reject great ideas without testing them in the market.
It’s like digging gold. You quickly discover thousands of stones and have little time to pick the gems. Most importantly, even after picking a great idea, the only way to confirm it is to build a product prototype around it for a quick round of testing in a real market environment.
Throughout the selection, ideas might mature, evolve, and further develop into fresh ideas. That’s where ideas initially perceived as poor can grow into big ideas. Every idea can branch out into hundreds more with one of them being the potential winner.
Raw diamonds are rough and easily overlooked. So this stage often requires acting on a hunch.
After several rounds of ideation and selection, consolidate on your notes to form a product hypothesis – something you think will do well in the market segment you’re targeting.
To validate your product proposition, you will need to come up with a product hypothesis – a thing to be confirmed by customers on whether they find it valuable or not.
“If we provide customers with the ability to snap a picture of a plant that will be quickly recognized with its name and description pre-filled, they will gladly find this valuable and be willing to choose our gardening app over any other.”
This is a hypothesis that was derived from the ideas about creating a gardening app for novice farmers. It’s based on a logical conclusion about the possible problem that the target customer is having. It’s yet to be confirmed that the customer is in fact looking to solve the problem and that is of high enough importance to them.
This is a form of educated guessing where you fuse a set of great ideas and map them against existing problems that your target customer is having. That gives a clear picture for the product to build to confirm this hypothesis.
Build an MVP
So far all we’ve developed is a set of assumptions based on the data we have. Now it’s time to verify those assumptions and find out as soon as possible whether we were right or wrong. MVP lets us validate the riskiest of those assumptions and experiment with potential solutions before we spend any more resources on building a real product.
The only way to truly confirm your hypothesis is to release the product which will find its early adopters in the mass market. The feedback from those early adopters will be a critical factor in deciding whether the idea is working out or it’s time to pivot and perhaps to re-explore more initial ideas.
If you’re deliberating over what should go into the MVP, ask yourself: what’s the smallest thing we can build to test the chosen hypothesis? Then create a bare-bones version of the product to test your hypothesis and validate your idea in the market. It’s more than just a prototype or a draft version, but more like 80% of the complete product.
Once the product is introduced to the market, it needs to evolve, adapt, and change based on the feedback from the target audience. That is to validate your concept before enhancing the product.
At this stage, you’re studying market feedback and tracking the behavior of the early adopters. It will give you insights into your customers’ minds. You’re trying to find out whether to pivot or continue in your course of action. Take note of any possible issues with the product, but don’t tackle them immediately because a possible pivot in the new direction might make those issues irrelevant.
If you decide to pivot, the cycle repeats. If you decide to continue with the course of action, then it’s time to tackle the missing features.
Enhance the product
After several rounds of MVP adjustments, you’re trying to establish a wider audience beyond early adopters. With the feedback from early adopters serving as a basis for improvements, the product will be gradually getting wished-for features, making it suitable for mass markets.
After the MVP refutes or confirms the hypothesis, you have two possible options – pivot or persevere. In the case of the former, you repeat the process. In the case of the latter, you step on the pedal – Lightly and gradually!
Now it’s time to find out which missing features are critical for mass markets and prioritize them accordingly in the backlog. You’re now adding the prioritized missing features to the MVP to evolve it into the desired product your target customer wants.
This is an opportunity to consolidate the product-market-fit as well as to expand your user base.