The product strategy costs Steve wasn’t aware of

Most of the products fail when startups don’t understand what the market needs and, consequently, they run out of money.

To make a long story short, these are the top two reasons for product failure that you will find in the majority of online surveys, interviews, and articles:

1. Understanding market needs is done in order to build something of value through a validation-based process.
2. Not running out of money is as much about raising capital, as it is about efficiently using existing resources.
   

Therefore, validation helps in building the right product for the market and in doing it as fast and cost-effectively as possible. Going to market without product validation is like walking the streets naked.

The more assumptions you make, the closer you are to the edge of falling ideas

Product owners and leaders tend to skip validation because they are, of course, too optimistic. Being optimistic is great, but the risk is strongly related to the number of assumptions we tend to make in such situations.

Here I will share the three most common assumptions I identified so far:

• The problem exists
• Their solution is the answer to the problem
• The market will adopt that solution.
  

These represent the ‘if’s’ that need validation. If product owners are to increase their odds of success. Personal biases are the driving forces behind these decisions, motivated by a lack of understanding of the benefits, overconfidence, and fear of moving too slow.

Gain better control over your invested resources

The obvious risk is that you can spend a lot of time and energy on something that nobody really cares about. By not following a validation process in your product development, you are basically going in the direction set solely by you, without the help of the most important stakeholders: the customers.

One less obvious risk is that you’ll also spend a lot of money inefficiently if your gut feeling is not good enough for the market. And this is the most painful one.

More specifically, the risks can be listed through a gradual approach:

1. There is no market need, as nobody wants the product enough. According to a CB Insights report, that’s the case of 35% of companies.
2. Although there is a need, you are not on the top of your customer’s mind because of weak differentiation. That’s 20% of the time.
3. Say you’ve become a priority, but you are not accessible enough through your distribution model.
4. Scalable growth is obtained, but there is weak retention due to an unfit solution, leading to a low lifetime customer value.
5. Although everything above was tackled, you are moving too slow and might miss a market opportunity due to waiting for 0 risk. There is always going to be a bit of risk in everything you do. Product mistime is the cause in 10% of the cases.

Tackling the risks often sounds easier in theory than putting them into practice. The many blockers the product owners identify down the road can be manageable and the right help can be found. In the long run, such a perspective will definitely pay off and can save your product and help you gain better control on the resources in play.

The benefits of validation can be extracted from the risks that are being tackled:

1. Better solution due to market understanding
2. Lower investment costs
3. Faster time to product/market fit
4. Happier customers
5. Higher confidence in the process and a constant sense of progress
   

Would you rather avoid the risks until later or start de-risking?

Within my experience of helping product owners in bringing their ideas into reality, I discovered that it is essential to focus more on providing consultancy and advice to help them address the main blockers.

Sharing the concerns is critical from the very early stage of a product life cycle. Building a product strategy on the wrong premises will not only affect the owners, but will damage the reputation of any other party involved in the process.

The journey of a product needs to include the validation stage earlier than the phase of an MVP. It is a part of the research stage.

Validating a product comes in three relevant steps:

1. Problem-solution: validate what do customers need and how you can solve it
2. Product-market: validate what the product needs to look like for market adoption
3. Business model: validate scalability through a fast and replicable business model
   

To better understand the different situations or scenarios product owners will potentially deal with according to their choices, I will provide a simple example to illustrate what de-risking through validation would look like:

“Steve has come with a perfect idea of what meditation practitioners need in order to improve their sessions and gain discipline in the routine.”

‍

Path A (without validation)

Steve thinks about all the features that the users need, as he is also part of the target audience, designs it, builds it, and launches the product on the market. (4 months / $100k)

Adoption is slow, not all features are used and recurrent customers don’t exist. The product has yet to obtain a fit on the market.

Steve includes other features that might help the product gain traction. (2 months / $50k)

The product has shown signs of traction, but it’s still not what the customers need.

Steve goes through the last phase three more times, in an ongoing attempt to satisfy the customers’ needs. (6 months / $150k)

Total time spent: 12 months

Total investment: $300k

Results: launched product with a struggling growth

Path B (with validation)

Steve knows that he first needs to understand the problem, so he researches the market and conducts interviews in order to validate that meditation practitioners actually have a need to improve their current sessions and discipline with their routine. It turns out routine isn’t a problem, only improving their current sessions through a personalized approach is. (10 days / personal time)

After validation, Steve comes up with a potential solution to the problem, so he sketches a product MVP version description, creates a fictional brand and launches a landing page in order to validate customer interest.

At first, there is low interest due to the overcomplicated descriptions and vague solution definition. Steve modifies the solution in order to adapt to its target audience. He tests the landing page again and high signs of interest are shown through thousands of signups. (1 month / $15k)

Now, Steve knows exactly what he needs to build for its customers, as they’ve already validated the potential solution through their early signs of interests shown through the product landing page.

A list of MVP functionalities is easy to define, as well as prioritization due to customer feedback. Steve starts building this version and launches it with customers that are already waiting eagerly. (3 months / $75k)

The MVP is launched and gaining traction, but Steve hasn’t yet achieved market fit because it isn’t growing and retaining customers at a high enough rate. He uses the current user base in order to survey and understand what are the most important features, for who and how the product can further improve on those points.

After doing so, he understands what features need change and what else to bring to the table. Steve develops this addition into the product and gains market fit. (2 months / 50k)

Total time spent: 6 months and 10 days

Total investment: $140k

Results: obtained product/market fit version and is looking to scale the business

Path C (with 5 days validation)

Steve doesn’t have the time or patience to go through the usual problem/solution fit phase, so he is open to risk a bit more in order to save on time and costs. He gathers the team of specialists needed in order to do so, schedules a full week of focusing on the matter, and starts a five-day validation sprint. (5 days / $10k)

With the right experts right next to him, Steve can validate his product idea as fast as one business week. No matter how complex, the following steps can be covered.

• Defining the goals, main challenges, and one target
• Coming up with a real solution
• Criticizing, deciding the prototype
• Creating the prototype
• User testing and interviews
  

Based on the findings, Steve can confidently move forward with an initial set of MVP functionalities and start building the solution. (3 months / $75k)

After doing so, he works on finding product-market fit, but it costs more due to the shorter time spent on understanding the market needs in the beginning. (2 months / $65k)

Total time spent: 5 months and 5 days

Total investment: $150k

Results: obtained problem/solution fit version in 5 days, product/market fit in 5 months, and is looking to scale the business

This is a short, idealistic, and incomplete example meant to explain the value brought by a validation-based approach in product development. There are other variables not covered here, but the essence is there. However, I am happy to chat with you about your own scenario.

I would recommend you to take this approach in your product development process if the things you value the most in building your startup are focus, confidence, speed, and efficiency. And you are humble enough to constantly look for understanding your market needs and wants.

At the end of the day, wouldn’t you prefer to de-risk the likelihood you spend months or years (and big dollars) scoping, designing, developing, testing something which doesn’t satisfy your customers' needs or provide enough value?

Do not ‘over validate’ it, though

Of course, there are cases in which validation doesn’t make sense and isn’t a necessity:

1. When the cost and time of developing a solution are lower than those of going through validation. (Think of a small feature that can rather be tested directly with current users)
2. When the product you’re launching is tapping into an unknown problem/market. Innovative solutions to unknown problems are hard to validate because the market doesn’t know yet that it needs it. You are creating the space. (Think of Instagram or iPhone)
   

The most important validation is the one in real market conditions, where you have a launched product that is gaining traction and satisfying user needs. Everything before are validation methods that are meant to de-risk the end goal.

What path would you choose?

Building a new product and going to market can be challenging, time-consuming, and needs investment. Through such a journey we prepare to make fast decisions and manage risk. Building and launching several products has taught us the relevance of validation ahead of making any major investment. Gathering feedback from the market and users can save effort, resources, and money. Submit your idea application and win your 5-day validation idea. Bring your idea to the market now.

‍