he emphasis of the previous guide was on demand, but in commercial research, market analysis is usually only a step towards creating new or improving existing products.
In the previous guide, we mentioned Product as an element of the Marketing loop, but did not explore it in detail. Now it is time.
A brief introduction to the product genetics
Products and services are a matter of coexistence in the modern economy. Just like in ecology, species interact and coexist, exchanging biochemical elements through food chains. In the economy, companies offer products and services to their customers — people or other companies in exchange for money — thus sustaining the cycle of life.
For future reference, we will not differentiate between products and services and will use the word “products” for anything that is made to serve customer needs.
In the wild, species evolve over generations, compete, struggle for survival, and fill ecological niches. In the artificial life of an economy, products evolve over releases, compete, struggle for survival, and fill market niches.
What makes organisms different from one another? It’s the genotype, the combination of 20,000–30,000 genes in their DNA. These genes determine all the processes of how an organism works by defining the recipes of protein synthesis. All living organisms have the same DNA mechanisms, and even very different organisms, such as humans, worms, or fruits, share 10,000 or more common genes in their genomes.
Let us explain the difference between the genome and the genotype. Genome is the set of all possible genes, for example the human genome contains about 25,000 genes. Genotype is a specific combination of genes for an individual organism. As long as every gene may have different variants (alleles), there are millions of trillions of possible combinations of these variants, and thus every one of the billions of humans on Earth has their own individual genotype. Genes are the same, but variants differ. An ethnic group usually shares similar alleles, so it is possible to say that not just individual persons, but groups of people have a specific averaged genotype.
If the life of products is so similar to the life of species, what if products also have their DNA? What if products also have genes? What if the genome, the long list of these genes is similar for different products? What if the visible difference between products (for example clay cups, probably the most antique products in human history and modern mobile phones, or power plant turbines) is just the difference of how the genes are expressed?
This crazy idea is not that crazy at all. In biology, genes define how an organism looks and how its organs function. Genes prescribe all processes that an organism needs in order to survive. What if the “product genes” define the same: the processes required for a product’s survival? That is how a product is built (the recipe of product assembly, the manufacturing specifications) and how a product is used by customers (the recipe of product application, the customer experience).
Each customer use case is the recipe corresponding to a specific customer need, and each manufacturing recipe corresponds to a specific assembly procedure required for a given product architecture. Together, these customer needs + manufacturing necessities may be called product requirements, or in a biological analogy, the set of genes, the product genome.
Similar to natural life, we will define the Customer genotype as the prioritized set of requirements for a specific customer segment, the list of all customer needs together with their priority. The genome (a set of needs) is similar for different segments, but genotypes (a set of needs plus their priorities) are individual for each customer. Customer segments are the population of customers that on average have similar priorities. Thus, the customer genotype determines the prioritized problems of a specific customer group.
We will define Product genotype as the set of the corresponding set of solutions that are intended to address these needs. For each need/problem/requirement, there is a recipe/solution/procedure for how this product satisfies this requirement.
Just as in biology, where DNA is the long helix chain of base pairs of nucleic acids, a product’s DNA may be imaged as a chain of problem-solution pairs. While the genome (the list of problems/needs) is the same, the genotypes (variants of priorities) are different. Different products target different customer segments. Even products that target the same segments may have different solutions to the same customer problems. And finally, different product releases may also have slightly different genotypes, as some of the solutions change from version to version of the product.
This product genetics concept gives us a clear vision of product evolution. Products are developed to satisfy either existing or emerging customer needs. By mutation and crossbreeding, they improve customer experiences and manufacturing procedures from generation to generation from release to release. Those that are the “problem-solution fittest” survive and fill the niches. If you want to develop a successful product, feel like a genetic engineer — explore the genotype of your customer segment, borrow ideas from competitors, design the application and replication procedures for the next version of your product that have the best fit with the customer genotype.
Research landscape of the Product
If you are responsible for designing a successful product, you have four main areas of research: customers, requirements, architecture, and features.
The main challenge here is to pick the right customer segment — one that is willing to pay and has the right needs that you are able to serve better than your competition. We covered the demand research process in the previous guide, so for the sake of brevity, let us just mention again that you need to explore the list of needs (genome), identify and compare customer segments with different priorities of need (customer genotypes) and find channels where the target audience is accessible.
A deeper analysis of the target audience will help you identify:
- what types of customers (customer segments)
- in which situation (context)
- facing which problem (core need)
- how they currently try to solve them (current solution)
- using what tools (competitors’ products)
- why they are looking for an alternative (unsatisfied demand, cost/usability problems)
It is recommended to explore each one of these items in detail. For example, by exploring the context, you’ll be able to identify situations when the problem occurs. The need itself is latent and invisible, but the situation is observable, which is perfect for finding the right customers at the right time and place.
Example: Some people at the airport are departing, others have just recently landed. Only those who arrived need a taxi. If you look at people with luggage, you don’t know exactly if they need a taxi or not. But you may differentiate who is flying in and who is flying out by observable context: if they are in the departures area, they are most likely departing, and if they are in the arrivals area, they have most likely recently landed. Not surprisingly, you’ll see a lot of taxi drivers at the arrivals area, and almost never at the departures one. Thus, invisible needs (needing a taxi or not) can be inferred from observable context/situation (floor).
We should also see the difference between core problems (why customers decide to look for a solution) and the usability problem (why customers that already have a solution are not happy with the existing tools).
Example: You moved to a new city with your family, and you want to find a gym not far from your house to do your strength workouts (core need in the core process, as you are used to going to the gym three times a week). You found a gym but you are not very happy with it, as it is too crowded during your preferable hours (usability need, as your favorite exercise machines are occupied by other people and you have to wait too long, so you may be considering another gym).
To analyze the usability of the product, you may want to explore the steps of how customers use the product (use cases, customer experience, or product applications chain). By analyzing the bottlenecks in this process you may identify the usability problems/needs and ideas that make a difference with the competitors.
Use cases are not the only items that comprise the list of requirements. You should also think of the supply chain and the assembly processes. Your product requires ingredients and components that you have freedom to choose. Some ingredients are more expensive, others are easily accessible. Some assembly processes are simple, others are more mature. By specifying the ways of how you bring the product together, deliver, and maintain it, you define the full list of requirements.
Keep in mind that different requirements have different priorities in the specific customer segment.
Customer genotype levels of needs:
- Take-my-money requirement: the customer needs it badly and is ready to pay for a solution.
- Must-have requirement: the customer expects this requirement to be satisfied by your product but wants to have it for free because all your competitors offer similar function at no cost
- Delighter requirement: the customer does not expect this requirement as an obligation, but feels like it is something that would be nice to have.
- No need requirement: most of the customers in the target segment do not identify this requirement as being significant.
Take-my-money and must-have requirements are both highly expected by your customers. The difference, though, is drastic. You will make money on the first and lose money on the latter. Both types of needs are hard and expensive to satisfy, but only Take-my-money needs are GOOD. They allow you to keep prices high and collect payments. Must-haves are BAD requirements. You’ll spend a lot of resources to satisfy these needs but customers will expect them for free and will not willingly pay the bills.
Example: If you own a coffee shop, the customers are willing to pay for the food (Take-my-money requirement), but they are not willing to pay for the facility heating, clean dishes, toilets, and wi-fi (Must-have requirements). They expect these to be taken for granted as self-understood part-of-the-service privileges. So when they pay for a cup of coffee, they want to enjoy the other features too. However, for you as the owner of the coffee shop, these must-have requirements are a burden, and not really a source of revenue. That being said, you have to satisfy these requirements at your own cost because your competitors also offer these privileges.
Thus, if you have identified a customer need, don’t celebrate it too early. Spend some time checking if this need will bring or consume your profits.
As we already know, the architecture is usually the set of processes (chains) and structures. When defining your product architecture, you need several chains and several structures as well.
First, you should think about three chains: The problem (core) chain, the solution chain, and the application chain.
The core (problem) chain: describe the core process of the customer where the problem occurs. They have some standard process, and one of the steps contains a problem. Usually, this is how your customer’s or quest giver’s process works and you are not allowed to change it. However, you need to understand this process and see how often and in which context the problem occurs.
Example: A bakery is producing cookies (core process), but if the cookies are kept too long in the oven (step of the core process), they burn and are spoiled (core problem).
The solution chain: describe how the problem is solved now and how potentially it can be solved. It is also a chain — a sequence of actions. There can be several alternative solution chains for the same problem that use alternative resources or tools. In contrast with the core (problem) chain, you are able to suggest your own solution and propose your improved procedure to solve the problem. Your quest giver usually expects a better solution that is cheaper, faster, and more reliable as compared to what they have today.
Examples of alternative solutions: 1) have a kitchen worker (resource) who is obliged to look at the cookies and take them out of oven (tool) once they are golden brown, 2) have a kitchen worker who takes them out once the timer (tool) rings, 3) the oven (tool) automatically turns off once the timer (tool) rings, 4) a computer vision algorithm (tool) turns the oven (tool) off when the cookies become golden brown.
Application chain: in the solution chain describe in more details how the specific tool is used in the solution chain. You may describe the steps of user experience and define user stories, identify the bottlenecks and reengineer the steps. This is what you are expected to change and improve. Usually, this is about specific designs and features that you may choose from.
Examples of application steps: 1) a kitchen worker has a hard time seeing the cookies through the oven glass. You may change the properties of the glass to prevent soot to help the kitchen worker oversee the cookies. 2) the timer is not well adjusted for the given oven, and you may define more precise inspection time intervals and cooking temperature for the given oven and type of cookies.
This brings us to the features space. At the end of the day, your product is a combination of features. The better features, the better properties your product has, the better a specific requirement can be satisfied. However, every feature has its cost. You can not build every feature at its best because you have your budget and time constraints.
This brings us back to the Level Up idea. If you can not give it all and give it now, you can ship the product releases, starting with Placeholders and Quick and Dirty prototypes to a more reliable Good Enough and State of the Art implementations. That is how you decide on your product genotypefrom version to version. And it is your job to keep it in accordance with the customer genotype of the target customer segment.
Keep in mind these levels of implementation:
- State of the Art implementation: you offer a unique solution with the most advanced and uncommon features possible. You have spent huge budgets to find this unique solution and want to differentiate from the competition. It is recommended that you upgrade to this level of implementation only for one or several Take-my-moneyrequirements. This level is very expensive so choose these killer-features wisely.
- Good Enough implementation: at this level please do not reinvent the wheel. Just implement the solution exactly the same way your competitors do. You don’t want to spend budgets on experiments. You want a solid proven solution, so copy the existing practices the most similar way possible. The customers are accustomed to this solution, so they will not blame you if you have it this way. They will not praise you either, but who cares. Let them praise you for that which makes you different, for your State of the Art features. The Good Enoughlevel is highly recommended for critical Must-have requirements. As we know, these requirements only consume profits, so do not overinvest here, just neutralize the competitors. Competitor research is obviously very much required here.
- Quick & Dirty implementation: at this level, you need the simplest possible implementation that is still functional. You may not need extensive research for this level, just do it quickly. In most cases it is exactly what is called: minimal viable product. It serves the function, solves the customer problem, so it is a great start.
- Placeholder implementation: there is no solution yet, just an outline of the solution idea. The customers can not satisfy their must-have needs with their placeholder, but those who feel this requirement as a delighter may be still satisfied. Placeholders are also great for explaining the intended design to the quest givers at the early stages of the quest. This is truly a “fake it till you make it” level of implementation. Just keep in mind you need to make it one day, so don’t fake it forever.
- Zero implementation: this is a great level of implementation as well. Sometimes it is the ideal level. You do nothing to satisfy the declared customer need. This is a true art of getting rid of some features and functions of the product. Less is more. Simplicity is key. Do or do not. Zero implementation is great because it implies zero cost and fast delivery. Customers love these things, so choose what you “do not” in all seriousness.
The main problems with products:
- Product does not solve the real customer problem and nobody buys it.
- Product is too late to the market, the competitors already satisfied the Take-my-money needs of the customers and created too many Must-have requirements that are hard to satisfy while they do not generate margins.
- Product is too early to the market, there is no mass-market demand, and only several early adopters but no exponential growth of the customer base.
- Some features are unexpectedly hard to implement and the product remains at the Placeholder or Quick-and-dirty level for too long which frustrates the customers and ruins the brand. It’s the “fake-it-till-you-make-it trap”.
- The core features are too easy to implement, so competition quickly makes the product a commodity with very low margins.
Not surprisingly, product development is a venture. There are high risks and uncertainties, low chances to win, but potentially a successful product can cannibalize the whole industry and reshape the market. So, the most unwise strategy today is to do nothing and expect that your existing products will secure your future profits. If you don’t challenge yourself and don’t experiment with the new versions, your competitors will. The business environment is also changing at a very fast pace. So the emerging needs and threats put us in a very fast-changing market and fast-evolving ecosystem of genotypes.
Depending on the market types described in the Demand guide, you may be competing in the B2C market or B2B markets, with either low or high costs of the customer acquisition and product releases.
If the customer acquisition cost is low, the markets will usually be dominated by several huge players who found the way to produce high-quality products at extremely low prices and who can easily deliver these products to billions of customers. If the product release cycle is short, this type of market is volatile and the leaders may change during just one decade. This is usually the most interesting market for venture investors because they may earn 10x or 100x return on their investment if they identified a new rapidly growing unicorn.
If the customer acquisition cost is high, but the product release cost is relatively low, this is a fragmented market. There are a large number of vendors, each of which being the king of its own local hill.
If both the customer acquisition and the product release costs are high, the market is dominated by several century-old moguls who have established long-term partnerships with the consumers and the supply chain and offer high-quality niche products with very long release cycles to a limited number of very serious customers.
Depending on the market type of your quest giver, product development strategies will of course differ as low customer acquisition cost allows for experimentation with customer genotype (problems) and low fidelity (Placeholder/Quick & Dirty) versions of the product, while fast release cycle allows for experimentation with the variability of product genotype (solutions).
Leveling guide — Product
In any case, there are some general patterns that can help you achieve great problem-solution fit for all types of market.
If you’re taking part in designing and building a new product from scratch:
Analyze the customers, pick the right customer segment and collect information about their customer genotype. Find out which customers and which situation faces problems, as well as how they try to solve them now with which tools, how they measure success, and why they are not happy with the current solutions.
Identify which of the most important needs are Take-my-money and which are Must-have requirements. Generally, you need to inventyour unique solution for the first, and copy existing solution from the second. For now, design Quick & Dirty solutions for the first, and Placeholders for the second.
If you’re researching demand for an existing product with the goal of increasing sales, skip phases 1–2 and go to the next phase.
Target discovery: Analyze the chains for selected important requirements. For the customer requirements, analyze the core chain (their main process where the problem occur), the solution chain (step by step process how they solve the problem now, what competitor tools they use, and what is the productivity of this solution), and the application chain (even more specifically step by step user experience with the competitor tools together with the usability complaints).
Design re-engineered solution chains and application chains for Take-my-money requirements. Try to offer a unique medium-fidelity Good Enough solution for these requirements. Borrow and copy the ideas from competitors to upgrade the most critical Must-have features. Start selling the product and collect feedback.
Add more requirements to your Product genotype. Your sales will be blocked by unsatisfied must-have requirements, so decide which requirements deserve your Good Enough investment. You may also add a Delighter to please the most demanding customers.
Upgrade the Take-my-money features to State-of-the-Art level. You need unique and perfectly polished solutions to the most important needs of the customers. Must-haves should be kept at Good Enough level, no more than that, keep your resources for Take-my-money and Delighters. Once the main Must-haves are satisfied, Delighters may become more important. Add more requirements, remember that Zero implementation is also meaningful if it is a reasonable decision for particular requirements and comply with the target Customer segment genotype.