How can your company successfully build a product for the first time?

I am often being approached by founders or CEO’s of companies whose business is to provide some sort of software development services to clients or whose business is not related to software development at all but they have an idea to build and sell a software product (or products) of their own. In either case, these are companies that don’t have any experience or knowledge about building products, and their requests are usually formulated in the following way:??

“We have a few ideas for building and selling our own software product(s) but no one in the company knows how to do it.”

“A client paid us to build this product for them and we think we can sell it to other similar companies. How do we do this?”

“We have built a product for our own internal use and now we want to sell it to other companies.”

“We don’t think providing services is a scalable and sustainable business model and we would like to also start building products.”

I have learned that many such founders and CEO’s do not realize in full what investments and organizational changes they need to make in order to succeed in such an endeavor. Here are some of the most common misconceptions:

• Can’t we train someone on the team on product management and give them the task to build the product?
• Can’t we outsource product management to some third party??
• Can’t we outsource software development to some third party??
• We don’t have UX designers on the team but we don’t need them since the product is B2B (or we don’t think we need a UX designer since they are not a must have to build the product)
• Our engineers are fully booked with other projects but we’ll assign one or two of them part time to work on this?
• We have a business analyst that can work on the product research, no need for engineers to be involved at this phase

These are common misconceptions and below I will try to explain what’s wrong with them and how companies that don’t have any knowledge or experience in product management can succeed in building successful products.?

The short answer is, these companies need to do two things - acquire knowledge of how product management is done and form an effective product team to work on the product ideas. Let’s break this down:

Product management knowledge basically means the process of building successful products. It starts with a product idea which needs to be validated. The process includes:

• Problem validation - aka research that aims to check if there are enough potential customers out there who experience the problem which the product is trying to solve. If there is not such a problem or if the problem is not important enough in the eyes of the customers, there is no point in building a solution for it.?

• Competitive analysis - research that aims to find out what alternative solutions customers currently choose from and what their strengths and weaknesses are.

• Value proposition design - defining the features and the benefits of the whole product in a way that positions it to win against competitors.

• Business modeling - deciding on the pricing structure and levels, calculating the potential revenue streams and operational costs, as well as the unit economics of the business.

• Prototyping - building a fake but realistic and cheap version of the product which can be used for solution validation and usability testing.

• Solution validation - research that aims to check if there are enough potential customers out there who are willing to buy the product at a price which would make a profitable business.

• Usability testing - research which aims to check if customers understand how to use the product and its ease of use.

• Go-to-market strategy - deciding on the initial customer segments to go after, as well as the marketing channels and messaging and the initial launch approach.

• Building the product - provided that all research and validation has yielded successful results, build the product.

• Launching the product - making the product available to a selected group of customers or to the entire market, depending on the specifics of the product.

• Continuous improvement - monitoring key metrics, collecting feedback from customers, designing new experiments and tests, launching new versions.

Now, this is a lot of knowledge to acquire for a company that doesn’t have any experience in this area. That is why the quickest and probably the most effective way to do the job is to hire a senior product manager who has experience in validating and building products from scratch.?

Even if you try to train an internal employee to do the job, as a first-time product manager, they will have a lot of struggles and questions with no one to turn to for help.?

Outsourcing the job to an external senior product manager is also not ideal for two reasons: 1) The knowledge which gets acquired throughout the market research is the source of your competitive advantage and if you split parts with your third party provider, this knowledge will be gone from your company. 2) Market research is not a one-time thing and needs to be continuously done throughout the life of the product, in order for this product to stay competitive and grow your business.??

This person, however, cannot do it alone - they need a team and the necessary enablement to succeed. Here is what is meant by an “effective” product team:

• A team that consists of a product manager, a UX designer, an engineer and in some cases (depending on the specifics of the product) a data scientist or a devops engineer. In most cases a PM, a UX designer, and an engineer would be enough.

• The product manager is responsible for the business success of the product while the UX designer is responsible for the user experience and the usability of the product. The engineer is responsible for the technical feasibility and the technical quality of the product.?

• The job of the product manager is to discover a product which provides value to a defined group of customers while at the same time generates enough profit for the company. The word “discover” is important because our initial idea for a product may turn out to be not viable but in the process of researching the needs of various customer groups, the team may come up with and test other product ideas which may turn out to be successful.?

• Having a UX designer on the team is also a must have because if you don’t have one, it means that either the product manager, or the engineers are doing whatever they can to put together some user interface. Firstly, chances are that neither the PM, nor the engineers had any training on interaction or graphic design and today’s competitive landscape requires a working, easy to use and even delightful to use interface. Secondly, your PM and engineers already have plenty of other work to do, let alone building interactive prototypes and testing them with users.

• The job of the engineer is to stay abreast with the latest technologies and to propose which ones are suitable to solve the business problems and can give the company a competitive advantage. Therefore, outsourcing engineering to a third party is not suitable for two reasons: 1) Third parties are usually not motivated or even culturally used to providing this kind of service and 2) Third parties often require that requirements are clear before they get involved in a project. And if requirements are already finalized, it is usually too late in the process to involve engineering and the benefit of researching and brainstorming solutions together, will be lost.

• The three team members - the PM, the UX designer, and the engineer - should be peers (i.e. no one reports to the others), so that there is a healthy tension between them when making trade-offs between business value, usability and technical feasibility.

• Note that the team does not use a waterfall process to work - e.g. the PM does the market research then hands tasks to the UX designer and when the prototype is ready, the engineer is involved to estimate the work. On the opposite - the team should work together to understand the market needs and to brainstorm and quickly test ideas for the potential solution.

• Since the team must be able to act autonomously and make decisions quickly based on the information they learn continuously from the research, it should consist of senior professionals who have enough experience with building new products. Certainly you would not want to give so much responsibility (and investment) in the hands of junior colleagues.?

• Since there is a lot to research and deliver, the team must be dedicated to the task of validating a single product and not get distracted by other projects in between. It is a common misconception that a team who has other priorities and tasks at hand, can do such rigorous research successfully and in a short time.?

• Upon successful validation of the product idea, it is time to build the product and the team should be extended with a few additional engineers, in order to speed up delivery and to maintain the product going forward. Note that these new engineers must be given enough time to get familiar with the research that has already been done, so that they can understand in detail the needs of target customers as well as the business problems that must be solved.?

To summarize, companies that don’t have any experience in product management but want to build successful software products, should invest in a senior, dedicated team of professionals with experience in building products from scratch and this team which should be given enough time to do in-depth market research as well as enough autonomy to make quick decisions whenever needed to test new product or feature ideas.?

I hope the above adds some clarity on the topic. Let me know in the comments if you have any questions or if you see other solutions to the problems outlined above.?

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