Saturday, 29 February 2020

Basic Guidelines for Product Offering Go/No-Go Decisions (Including Product Fit/Market Fit)

I've worked for Software/IT Consulting companies, Product Development Companies and System/Service Integration companies along my career path. Most recently I've noticed that some of the basic decision making around what products and service offerings that should be developed have missed some critical gateways that resulted in full or partial product failure (i.e. it doesn't make a good return on investment or ever turn a profit).

Often, component licensing costs are ignored or forgotten or the actual pricing is something that the market cannot bear. Sometimes this is due to lack of multi-tenancy support so the product offering economics are not scalable.

Licensing and subscription costs may go down over time (esp with AWS and Azure services becoming gradually cheaper as they reach greater economies of scale and proportional levels of competition). However, this may not happen quickly enough over the product lifetime to deliver profitability. In this case service offerings/products need to be "end-of-lifed" ("EOL'd") or migrated to new platforms and using components with lower cost structures.

Going back to basics, I put this diagram together to outline some key principles of product offer development which should be considered as gateways when deciding to bring a product to market.

What makes a product worthwhile? It starts with being something customers want to buy (and buy enough of). If you find this sweet spot, then you have product/market fit - which means you're no longer pushing your product onto customers. You also need to have a clear vision - otherwise delivery will be problematic when building your product out. There are many articles on product and market fit available - these are just some of my ideas that resonate based on recent experience.

In particular, critical profitability constraints can be forgotten when that "cool new tech" comes out or "everyone else is doing this in the market":


What is clear is that product-market fit is an ideal - but not a sufficient indicator of whether a product should go to market. There are other factors to be considered including cost structures and viability of ongoing product development and marketing to maintain that fit, customer value and (hopefully) margins.  


12 comments:

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