Defining Your Market Opportunity

In this series of posts, we discuss the role of  Product Manager in defining, documenting and communicating market opportunities – in particular answering five key questions about your proposed product… its:

  1. Value Proposition
  2. Differentiator
  3. Target Customer and Market Size
  4. Competitors and Alternatives
  5. Risks and Assumptions 

Define Your Market Opportunity First

Stop. Before you define requirements for, or further implement, your product solution or feature set, ask yourself these questions:

  • Do you have a clear perspective of, and a shared understanding in our team for, who the solution is intended for?
  • Are you solving a significant problem and is it important that the problem is solved? Are you clear why this is a priority for your company?
  • Can you articulate exactly how customers will benefit? Is this a message that can be communicated to them in a compelling way?
  • Have you understood how you will position your product as a unique improvement over how customers solve the same problem today?
  • Do you have more than one type of end-user or customer? If yes, do you know for which one should you optimize your solution?
  • Do you know what risks might derail your initiative? Do you know how you are going to deal with them should they eventuate?
  • Do you have the agreement of all internal stakeholders on why, and for whom, the company is tackling this initiative?
  • Have you established useful constraints and context that will serve to focus your team, making sure to limit the project’s scope?
  • When asked, are you able to consistently and convincingly provide answers to these questions and other challenges from stakeholders?

If you answered “no” to any of these questions, then take a step back to more thoroughly define your opportunity before proceeding further.

Defining your market opportunity does not require an intensive, costly effort. And it need not delay urgent delivery of your project. Instead using lightweight, informative, and focusing frameworks you can focus, save time, save cost, and align everyone behind a common goal.

Take the time to assess and confirm your market opportunity and you will:

  • Avoid opportunity costs – Validate you are working on a meaningful customer problem, and the most important ones to your business. Uncover hidden assumptions that challenge your suppositions.
  • Avoid later confusion and lack of clarity – You and your stakeholders may have different ideas of what the problem is, why it is important to solve, and what success will look like. Without establishing common understanding early on, your product initiatives may be subject to disruption as goals or plans are revisited. Provide context and a focused statement of intent to inform and align stakeholders and motivate your team towards a common purpose.
  • Establish guidelines for communicating to customers – You’ll confirm a clear picture of who you are solving the problem for, and why it is important to solve. This helps you determine testing and validation strategies, builds empathy towards your customer, and informs your marketing message.
  • Set a baseline for defining success – You’ll have a clear picture on why solving the problem is interesting for your business, and the market environment and risks you face. As you learn new information, you’ll want to periodically check that your answers are still valid. Establish post-launch success criteria to determine if you met your goals. This will help you avoid the tendency to “rewrite history” if the results are not to expectations. If you didn’t meet the goals you set, what did you underestimate? What needs addressing to get your product on track?

When conducting an opportunity assessment, follow these guidelines:

  • Do it before you start defining solutions – Don’t jump into problem-solving mode before having a handle on the scope of the challenge. Ignore the solution or features you already have in mind. Take a moment to fully comprehend why and for whom you are solving the problem before you commit to building a particular solution.
  • Do it for any large-scale initiative – Conduct analysis for new product development, major product enhancements, taking existing products into new markets, and other large undertakings. When you are working on short-term initiatives or optimization of existing features where the issues are well known, it’s generally not needed. But if you are about to commit significant resources to a project, you owe it to yourself and your organization to define precisely why you should pursue the opportunity.
  • It’s not a Pitch – An opportunity assessment is not an attempt sell an idea to decision-makers. It’s intended to gather data, organize your thinking, and communicate how best to proceed. Be objective and avoid emotional attachment. Embrace challenging questions with balanced, in-depth answers. Be willing to state assumptions and articulate risks, weaknesses and unknowns.

Keep your documentation lightweight

Try to keep your opportunity assessments to a few pages that are easy to comprehend and summarize. Use simple language, data, diagrams, and bullet points and link to more extensive data if required. Create a short presentation version to walk-through with stakeholders.

Some organizations favor Market Requirement Documents (MRDs). These are extensive documents that include market data (often with a list of customer and sales requests), and a business case to justify the investment. MRDs, as a rule, have become increasingly discredited as a useful means for evaluating and communicating opportunities for three primary reasons:

  1. Rather than a critical assessment of the opportunity, they are often written to impress and win over stakeholders. Rarely does an MRD recommend not pursuing an idea.
  2. MRDs take time to write – and they are usually too long to read. As a result, they are often ignored and quickly out of when business and market realities change.
  3. They are uninspiring and prescriptive. Lacking vision, they often preempt specific solutions, and don’t leave room for learning and adapting. At worst, they define a wish-list of customer “must-haves”.

Opportunity analysis does need to be informed by customer and market research. And you should make extensive use of all materials available to you – collaborate with your User Experience, Consumer Insights, Data Analytics, Product Marketing, and Sales teams. But don’t think you have to put everything on hold until you have completed lengthy, upfront research. Opportunity assessments document a hypothesis – one which might change as you learn more as you go.

Business Plans outline project launch timeline, user growth, revenue, engineering resourcing levels, and profitability. They’re useful when communicating performance and analyzing future scenarios for existing products, but not for new feature or product development. Full of “Wild Ass Guesses” (WAGs), they set unreasonable expectations around a largely un-scoped, un-tested initiative. An attractive business case might mislead you into a false sense of security, skipping validation and adapting your plan as your product evolves. They are rarely revisited after launch to ensure you delivered all that was promised. Instead, use simple tools such as the Lean Business Model Canvas. You’ll find a short overview, along with a P&L 101 for Product Managers, in Appendix A.

Why do we have only five key questions? They’re probably not the only questions you should answer, but they will give you a useful starting point for establishing your baseline. You are creating a living document, however. As you proceed, update it with new information and answer other questions that come up along the way. These may include:

  • What are our success criteria and what are our key metrics?
  • How do we go-to-market? How will you reach your customers, vendors and partners?
  • What do we estimate the cost to be and what is our monetization model? (Only add these once you know enough for a realistic assessment.)

In this post we will consider excerpts from an example Defining Opportunities document, for a product called “Babylon”, a home-hydroponics system for growing herbs for cooking and seasonal vegetables in a convenient, space-efficient system. Target customers include urban professionals renting apartments, and the developers who build rental units. For brevity, our examples include much less information than you will need to provide when you complete your analysis but nevertheless should give you insight on how to make the frameworks actionable.



 

War story – Don’t Jump Into Solutions

A few years back I was meeting with a Product Leader in my team. He was updating me on his project, one that I had initially supported, and progress looked good. He described details about the features he’d defined, and the results of discussions with engineers and the designs for the technology platform.

At one point, I realized the initiative didn’t seem to make as much business sense as perhaps it had a few weeks back.

“Wait”, I asked, “why are we doing this again?”.

“But we prioritized it”.

“Yes, and the product is excellent”, I replied. “But given the changes happening in our business, I’m not sure it makes as much sense to do it anymore.”

Taken aback, he asked “Didn’t you like this project?”

Now it was my turn to be alarmed. “Just because I think something is a good idea, it doesn’t mean it is.”

We were lacking clear understanding of the scope of the problem we were addressing, had not questioned enough the assumptions we were making, and had not ensured alignment across stakeholders (myself included).

We’d jumped into solving a problem without clearly defining why working on it was a priority and without getting agreement from others.

 

 

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