The Lean Product Playbook · Dan Olsen · 2015
The Lean Product Playbook offers the clearest description of a logical process you can follow to achieve product-market fit. It’s filled with practical advice. If you weren’t approaching product development in the right order, then this book will pay for itself 1000 times over.
Key Highlights
- Products fail when they don't meet customer needs in a way that’s better than alternatives.
- Product-Market fit is when you’ve built a product that creates significant customer value.
- There’s a logical sequential process in which to approach achieving product market fit (both for new products and new features)
- The Lean Product Process consists of six steps:
- Determine your target customers
- Identify underserved customer needs
- Define your value proposition
- Specify your minimum viable product (MVP) feature set
- Create your MVP prototype
- Test your MVP with customers
- Think of each layer as an opportunity to test and refine a hypothesis before moving on. Approach them in the right order, and reduce waste. The key is to avoid building more that you need to test the most important hypothesis.
- Separate the problem space (customer needs) from the solution space (any representation of the product).Form a robust problem-space definition before starting product design. Articulate the hypotheses you’ve made and solicit customer feedback on early ideas to test those hypotheses.
- Form a hypotheses about customer needs and the relative importance of them. Contextual inquiry or customer discovery can help you. Observe pain points, ask them what they like and don't like.
- Critics of user-centered design quote Henry Ford: “If I had asked people what they wanted, they would have said a faster horse.” Yes customers won’t identify the next breakthrough solution, but we’re not expecting them to. Those who invoke Henry Ford do so as an excuse not to talk to customers, because they think they have all the answers.
- That said: feedback from the solution space can inform your problem space hypotheses.
- “Customers don't care about your solution. They care about their problems.”
- Different customers will have different needs—and even those who have the same needs can have distinct views on their relative importance.
- Develop a hypotheses about your target market.
- Segment your target market by defining your target customer precisely (demographic, psychographic, behavioural, or needs). Personas can help. One-on-one interviews with customers are vital for understanding their needs and collecting data for personas.
- Early adopters might have different needs and preferences to the early majority.
- Focus on customers that use your product frequently and recommend it to others.
- Customer needs, benefits, desires, wants, user goals, user stories, and pain points all essentially refer to what customers value. Pain points are needs that current solutions do not adequately meet, resulting in customer dissatisfaction.
- Needs are layered like onions, with multiple levels that can be uncovered by asking probing questions. Benefits should be articulated precisely, starting with a verb, clearly conveying value, and often framed as increasing something desired or decreasing something undesired.
- Keep asking "Why is that important to you?" until no new answers emerge.
- The importance vs. satisfaction framework prioritises needs based on their potential to create customer value. Look for high importance + low satisfaction as they provide a significant opportunity to add value. Importance is a problem-space concept, while satisfaction is a solution-space concept.
- The amount of customer value delivered by a product or feature can be calculated as importance * satisfaction (the area of the rectangle formed with the origin on an importance vs. satisfaction graph). The opportunity to create additional value is (importance * (1 - satisfaction)) or (maximum possible value - delivered value). Improvements generate value equal to the area of the incremental rectangle.
- The Kano model categorises customer needs into three types forming hierarchy that must be addressed in order, with must-haves as the foundation:
- must-haves (their absence causes dissatisfaction)
- performance needs (more is better)
- delighters (unexpected benefits that exceed expectations)
- Once you've identified the important customer needs you could address, you must deliberately decide which ones your product will focus on. A good product addresses a set of needs that are both important and cohesive.
- Identify a candidate for the minimum viable product (MVP) and test it to reveal incorrect assumptions. Each test helps you learn new information that refines your understanding with each iteration.
- Strategy means deciding what your product won't do. Your product value proposition identifies the specific needs you'll address and how your product is better and different than alternatives.
- Use the Kano model to classify needs as must-haves, performance benefits, or delighters in the context of your competitors. Articulate the benefits you plan to provide and how you aim to be better than competitors. Project forward in time, anticipating market trends and likely competitor moves, especially in rapidly changing markets.
- For each benefit in your value proposition, brainstorm feature ideas. Transition from problem space to solution space. Capture the ideas, organise them by benefit, and prioritise the list for each benefit based on expected customer value.
- Write features as user stories to keep the corresponding benefit clear.
- Break features down into smaller chunks of functionality to reduce scope and build only the most valuable pieces. Smaller batch sizes increase velocity by enabling faster feedback, reducing risk and waste.
- Estimate the effort for each user story using story points. Stories above a maximum threshold of points should be broken down into smaller stories below the threshold.
- Prioritise feature chunks using Return on Investment return on investment.
- Decide on the minimum set of functionality for your MVP candidate. Include all must-haves, enough of the main performance benefit to beat the competition, and the top delighter for differentiation.
- Limit planning to 1-2 versions ahead, as much will change after first customer feedback.
- Test your MVP with customers by creating a UX prototype. The goal is to build a prototype for testing, not the actual product to enable faster learning with fewer resources. The process applies to entire products, new features, or redesigns.
- The term "MVP tests" is more precise than "MVP" and avoids debate over what constitutes an MVP. Limit scope but aim to deliver customer value.
- Marketing tests gauge interest in the product description. Product tests solicit feedback on actual functionality.
- Quantitative tests involve many customers and yield aggregate results on what actions were taken. Qualitative tests involve fewer customers but provide insights into why they took certain actions.
- Marketing MVP Tests:
- Qualitative Tests: These involve soliciting feedback on marketing materials such as landing pages, videos, ads, and emails.
- Quantitative Tests: These tests, such as landing page/smoke tests, explainer videos, Ad campaigns, and A/B testing, validate demand and optimize customer acquisition and conversion.
- Product MVP Tests:
- Qualitative Tests: These tests assess and improve product-market fit by testing the product's design with customers before and after building it. This includes testing design deliverables before coding, testing live product after coding, and using Wizard of Oz and concierge MVPs, and fake door/404 page tests.
- Quantitative Tests: These tests, such as product analytics and A/B Testing, provide numerical data for analysis.
- The UX Design Iceberg framework has four layers: conceptual design (underlying concept), information architecture (structure), interaction design (user flows and feedback), and visual design (look and feel).
- Lean emphasises quick learning and iteration to modify hypotheses and MVPs based on customer feedback, improving product-market fit with each round.
- The Hypothesize-Design-Test-Learn loop starts with problem space hypotheses, transitions to solution space with design artefacts or products, tests with customers, learns from observations, and revises hypotheses.
- Refer to the Product-Market Fit Pyramid when validating and invalidating hypotheses. Address issues at the lowest level first before moving up.
- Capture key observations from each user testing wave in a table, prioritising changes based on the most common feedback.
- No hard rule determines when an MVP is validated "enough." Testing with live products is better than artefacts, as actual behaviour trumps opinions.
- If iterations don't yield progress, map problems to the Product-Market Fit Pyramid. Make sure you’re not Iterating at the wrong level.
- Consider pivoting if target customers are lukewarm on the MVP or no customer archetype is excited about it. Tests can clarify the best pivot direction
- Build your product using agile development (iterative and incremental methodologies to deliver working software early and continuously, focusing on customer value). You’ll be able to: react to changes quickly, get earlier customer feedback and reduce estimation error through smaller batch sizes.
- Before launch, new products rely on qualitative research with prospective customers. After launch, quantitative learning methods (analytics and A/B testing) become available.
- Dave McClure's "Startup Metrics for Pirates" framework (AARRR) includes acquisition, activation, retention, revenue, and referral. Tracking 2-3 key metrics for each element is recommended.
- The "metric that matters most" (MTMM) changes over time due to diminishing returns. For new products, the typical MTMM order is retention (product-market fit), conversion (optimising the funnel), and acquisition (attracting prospects).
- Retention rate is the best metric to measure product-market fit. Retention curves visualise customer retention over time, with key parameters being initial drop-off rate, rate of descent, and terminal value. Improving these parameters indicates stronger product-market fit.
- Cohort analysis examines metrics for different user groups (cohorts) over time. Improving product-market fit is reflected in newer cohorts having higher retention curves.
- The equation of your business (revenue = number of paying users × average revenue per user) can be analysed on a per-user basis to optimise the business model.
- Customer lifetime value (LTV) is the profit a customer generates without considering acquisition costs. When LTV exceeds customer acquisition cost (CAC), each new customer is profitable. Increasing LTV involves increasing average revenue per user (ARPU) and decreasing churn rate.
- Companies that learn from customers and iterate quickly have a competitive advantage. Speed becomes a powerful weapon in today's fast-paced world.
- The Lean Product Analytics Process:
- Define key metrics for the business
- Measure metrics to establish baseline values
- Evaluate each metric's upside potential and ease of improvement
- Select the "metric that matters most" (MTMM) based on the most promising opportunities
- Brainstorm improvement ideas for the top metric and estimate their impact (form hypotheses)
- Choose the highest ROI idea to pursue
- Design and implement the top improvement idea, ideally using A/B testing
- Iterate and improve the metric until diminishing returns, then identify the next MTMM
- Be cautious of getting stuck at a local maximum when improving a metric. Consider completely different alternatives to break through and achieve further improvements.
- A/B testing is a powerful evidence-based decision-making tool, but it should be complemented with qualitative learning to understand the "whys" behind user behavior.
- The Product-Market Fit Pyramid's layers are interconnected. Changing foundational hypotheses (target customers, underserved benefits, value proposition) after building the product is like an earthquake, requiring rebuilding from scratch.
- The Lean Product Process sequence validates key hypotheses in an order that reduces risk and increases the odds of achieving product-market fit.
- The problem space requires more qualitative research to create, test, and improve hypotheses, while the solution space is more amenable to quantitative A/B testing.
- There is a natural progression from qualitative learning (defining the product) to quantitative learning (optimising the product) after launch. Both are necessary for creating a successful product.
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Book Highlights
When performing the experiment, you need data for the recommender to train and calculate the predictions, but you also need data to test whether the predications work. To handle this, you’ll split the data. You need three data sets: test, training, and validation. Kim Falk · Practical Recommender Systems
Your overarching goal is to ensure you hire competent people of character, and that every hire—at least for product managers, product designers, and tech leads—should raise the average. Marty Cagan · Empowered
Any product that you actually build exists in solution space, as do any product designs that you create—such as mockups, wireframes, or prototypes. Solution space includes any product or representation of a product that is used by or intended for use by a customer. It is the opposite of a blank slate. When you build a product, you have chosen a specific implementation. Whether you've done so explicitly or not, you've determined how the product looks, what it does, and how it works. Dan Olsen · The Lean Product Playbook
Giving people the time to finish what they have to say makes them feel valued. Roman Pichler · How to Lead in Product Management
Quotes & Tweets
Try to disprove your best ideas. James Clear
The decision is less important than the actions that follow it. Sahil Bloom