Product Management: Problem identification Flashcards
Efficiency gain
Something that results in a process being less expensive to complete (shorter amount of time, less money, etc).
TAM
Total Addressable Market. A measure of the revenue opportunity for a product.
ARPU
Average Revenue per User. The average amount of revenue you receive for each user you have, usually measured by year.
ROI
Return On Investment. The ratio between the net profit and amount of investment. A high ROI indicates more impact with less effort.
Payback period
The amount of time that it takes for a product to recoup the initial investment required to build it
Focus group
A small group of people you can present concepts to in order to see how they react. Generally, this will be a diverse group of people and you will have specific questions you’d like to get their feedback on.
Target User
A representation of a group of users with shared characteristics.
Sources that can be used for problem identification
Market research User research Product Data Support Data Efficiency gains
What happens when a product solves user problems, but does not meet business goals?
The product won’t survive long term, or the business can go under.
What are some questions to get you started in understanding the market?
What benefits does [goal/productl] provide?
What products are already in the market?
How much do people spend on [goal/product]?
What are the different ways to deliver [goal/product]?
What are the pros and cons?
Signs of Poor Product/Market fit
Users arent getting value
No word of mouth
NO press buzz
slow growth
Signs of Good Product/Market fit
Users get a lot of value
Product practically sells itself
Press is reaching out to talk to you about your product
Product in high demand
Factors that make a good market
Size (bigger/better)
Growth
Ease of acquisition
Value Hypothesis
A value hypothesis is an attempt to articulate the key assumption that underlies why a customer is likely to use your product. Identifying a compelling value hypothesis is what I call finding product/market fit
Product/Market Fit
product/market fit means being in a good market with a product that can satisfy that market.
Why is the market more important than the product
but assuming the team is baseline competent and the product is fundamentally acceptable, a great market will tend to equal success and a poor market will tend to equal failure.” That’s why time spent building a business around the product alone is pointless: “Best case, it’s going to be a zombie. … in a terrible market, you can have the best product in the world and an absolutely killer team, and it doesn’t matter – you’re going to fail. You’ll break your pick for years trying to find customers who don’t exist for your marvelous product, and your wonderful team will eventually get demoralized and quit, and your startup will die.” The converse is also true. You can have an OK team and a buggy and incomplete product but if the market is great and you are the best product available success can happen both suddenly and quickly. That success won’t last unless those products are fixed, but at least the business has the beginnings of something wonderful.
A Big reason Start-ups die
One of the most common ways that startups die is “premature scaling,” a term first used by Steve Blank. A business is “scaling prematurely” if it is spending significant amounts of money on growth before it has discovered and developed PMF.
Target User
Users with shared characteristics who are likely interested in your product
Target User characteristics
Demographics
Motivations
Goals
Frustrations
User persona should include
Name Image Quote Description Frustration Goals Motivation
TAM
Total addressable market
It is a measure of the revenue opportunity for a product or service
TAM = ARPU x users in the market
ARPU = Average Revenue Per User
3 ways to calculate TAM
Top Down
You start with a high level view of the economy, and then narrow that down based on factors like demographics. For example, you usually will start will everyone in the world and narrow down that audience to people who are interested in your product.
Bottoms Up
This involves using known data points that you have (data from early customers and sales) that you could extrapolate to represent a larger market opportunity. For example, if you are already selling a product in one region and were considering selling it globally.
Value Theory
Generally used for new product categories where you don’t have much information to base estimates on. This involves conducting market research to understand how much people would pay for your product and how many potential customers you have.
ROI
ROI = (impact - cost) / cost
ROI is a way to measure the efficiency of an investment (like deciding to build a new product or feature). Understanding and calculating ROI for different problems will help you to understand where to focus your team’s time in order to have the biggest impact.
Payback Period
Payback period = Cost / (Impact / Time) Payback period = $5 / ($18 / 3 years) Payback period = $5 / $6 per year Payback period = ⅚ years or 10 months
Which two financial metrics should be calculated to find out if it makes sense to solve a problem
Calculating ROI and payback periods are two important tools to help you understand if it makes sense to solve a problem. Projects with positive ROIs will cover the investment required to build the product…
Projects with negative ROIs will not and won’t make sense to pursue. Calculating the payback period allows you to understand how long it will take before the product recoups the upfront investment required to build it.
What should hypotheses be based on
Your hypotheses should be based on:
Customer needs: Is this a real problem?
Your solution: Painkiller or Vitamin?, Does it really solve the problem?, What alternatives does the customer have? Is your solution way better?
Differentiation: How is it different?
Value: How much will people pay for it? What can you do to increase willingness to pay?, How much do people pay for alternatives?
Ways to test a hypothesis?
User interviews
Focus groups
Surveys
Design sprint
When should you not pursue an idea in its current form
If you find that:
You are not addressing a customer need
Your solution isn’t providing value
Your product isn’t differentiated enough
There’s no willingness to pay…
4 steps in testing product/market fit hypothesis
Phase 1: State your hypotheses and draw the business model canvas.
Phase 2: Test the problem: Get out of the building and test your understanding of the customer’s problem or need.
Phase 3: Test the solution. If you’re on the web, build a low-fidelity (and then high-fidelity) prototype, and again test your understanding of customer’s needs, and whether or not your solution matches up. If it does match up, you will have achieved product/market fit.
Phase 4: Verify your pivot. Do people agree that you’re solving a high value problem or need? Do you understand your business model enough to start test selling?
How to format hypothesis statement
We believe that [this ability] will lead to [this result]. We will know that we have succeeded when [we see a measurable sign].
I believe that [target group] will [execute this repeatable action/use this solution], which for [this reason] will lead to [an expected measurable result].
If [cause], then [effect], because [reason].
If [I do], then [thing] will happen.
We believe that with [activity] for [these people] [this result / this effect] will happen.
What topics should be included in a Business case
Business problem Benefits Costs Risks Possible solutions Timeline Competition
What is the purpose of a Business Case?
The goal is to convince sponsors/stakeholders to approve the project. To justify why a product should be build
What are the components of a Business case
Executive Summary The Executive summary summarizes the entire document, including the recommendation. You want to make sure that it has enough detail that if it’s the only thing people read they will understand the justifications for building the product. It’s also the first thing people read and usually the last thing you will write to make sure that everything is cohesive.
Problem Statement The Problem Statement explains the problem you are trying to solve, as well as the associated goals. It should also clearly link the problem back to the business strategy and goals.
Analysis of Product Opportunity In the Analysis of Product Opportunity section, you discuss the merits of why solving the problem is important. You’ll usually want to touch on the cost of the problem and the size of the opportunity. Additionally, you can discuss what would happen if you didn’t solve the problem.
Possible Solutions In the Possible Solutions section, you will describe the potential solutions to the problem. For each solution, you should discuss benefits, cost, timeline, and risks.
Recommended Approach And finally in the Recommended Approach section, you put forward your recommendation for which solution is the best and why.
Proces for identifying opportunities
- Identify problems
- Understand the Market
- Identify Target Users
- Calculate TAM, ROI, Payback period
- Create and evaluate Hypothesis
- Create a Business case
