Chapter 7 Prioritizing and Selecting Your Ideas Product Management

IN THIS CHAPTER

• Getting your priorities in order
• Evaluating scoring models to understand the customer point of view

This chapter shows you how to prioritize all the great ideas you have generated so far so
that your company can determine where to invest its money and resources. Through the
use of simple yet powerful prioritization techniques, you’ll be able to determine which
ideas to proceed with.

Prioritizing Your Ideas

You have a long list of product ideas. They all are possible opportunities. However , your
development budget often restricts you to just one choice. What’s the best way to make
this choice?
Your job as the product manager is to make sure the idea you choose to recommend
investing in is a good fit that will work for your company . Use Table 7-1 to find an
opportunity that your company will welcome.

TABLE 7-1 Finding Ideas That Fit with Your Company

	Company	Product	Match: Yes or No?
Vision	Put the company’s vision statement here.	Put the product’s vision statement here.
Brand	What’s the company’s brand?	What do you want the product’s brand to be?
Positioning	How is the company positioned in the marketplace?	How might the product be positioned in the marketplace?
Competency	What are the company’s existing core competences? What other competencies can it acquire?	Does the product take advantage of the company’s core competencies?
Distribution	What distribution channels does the company currently have?	What distribution channel does the product need?
Unique Selling Proposition (USP)	What’s the company’s USP?	What are the product’s USPs?
V alue	What value does the company provide?	What value does the product provide?

Finding the right fit with the product-market fit
triad

Getting a profitable product to market successfully isn’t for the faint of heart. Figure 7-1
shows the product-market fit triad, which is a way of looking at the three major
components that you must balance in order to bring a successful product to market. You’re balancing these three areas at all times as you build your solution:

• Problem: Address the correct and valuable customer needs.
• Product: Meet those needs well.
• Business model: Have the product available through the correct channel (where the customer can find it) and at an attractive price (where the customer will purchase the product and sustain the business).

Chapters 1 and 4 discuss solving customer problems and define what exactly a product
consists of . A business model is how you sell the product to the customer and make money , including the entire product offering, support, and service and other expense and revenue items. For example, a popular business model is called the razors and blades model, which many razor manufacturers use. Rather than trying to make a lot of money selling you a fancy razor up-front, with the razors and blades model the company sells you an inexpensive razor knowing that it will make a profit many times in the future when you purchase replacement blades that you can only get from that company .

Using the product-market fit model is like juggling with 3 hands and 12 balls. When
something changes with one hand, the other two need to know whether it impacts them — and how . You use a process of discovery loops to proactively manage learning about how to optimize for each vertex of the product-market fit triad: the product, the problem, and the business model.

Each discovery loop has four phases: discover , hypothesis, test, and learn. Typically , you start with discover as your first step. Using the market research methods in Chapter 5 , you gain insight into one of the three parts of the product-market fit triad. On that basis, you develop a hypothesis. Try a simple example: earphones for smartphones. On the product side, you discover or observe that customers like to talk but not have the phone to their ears. Maybe wired earphones could provide a solution to this customer problem. You then hypothesize: “I believe that a wired earphone with a small speaker would resolve the problems of customers having to use the phone on speaker because they want to use their hands to do something else at the same time.” The next step is to create a test. You could have someone solder together rudimentary earphones and have a few friends try it out. You’d learn that though the hypothesis is true. However , you would then discover that the headphone wires get tangled up. So you’d write another hypothesis, test the hypothesis, and modify the product accordingly .

Remember that three-handed juggle? While you’re changing the product, you keep refining your view of the problem it solves and researching the market to ensure enough potential customers exist to merit the investment in manufacturing or otherwise bringing a product to market. Each of these discoveries leads to its own loop of interconnected learning.

Putting business canvases to use

A business canvas is a simple template for writing down your assumptions about a product and then tracking how they change over time. Three types of business canvases include the problem canvas, the product solution canvas, and the business model solution canvas. Figure 7-2 gives an example of the problem canvas. The sections on this canvas help you define the customer and the problem (you create a product to solve the customer’s problem). In the scenario section, you have room to dig deeper into the customer’s problem. Think of a customer who’s a father working in a home office with a paper shredder in the corner . His problem is that he is concerned his children may be hurt if the shredder turns on easily while they’re playing in his office. This scenario is your opportunity to give more context to his situation by describing aspects of his problem that will help your engineers create potential solutions.

Under alternatives on this canvas you would write down what else the father could do to
protect his children. He may decide to put the shredder high up on a shelf or cover it with a heavy box when he isn’t using it. And then under success , write down how customers define success. In this example, it could be that the solution involves being able to shred a document within one second and knowing that, regardless of whether he turns it off , the
shredder can’t injure his children. In this example, the evidence to pay may include
assumptions about how much disposable income the expected customer has. If he has a lot of disposable income, then the cost versus the benefit of keeping his children safe may be an obvious trade-off that means he’ll invest the money in your shredder solution.
The product solution canvas in Figure 7-3 includes the most important aspects that you
need to consider with respect to all parts of the product solution as you evolve and
advance your ideas.

In Figure 7-4 , the business canvas helps you know what to consider in terms of all the
parts of building a workable and profitable business model around your product idea.

These canvases are meant to be large. They’re typically 3-x-5-foot (1-x-1.5-meter ,
or about A1 size) posters. Y ou can also create them by using a couple of sheets of flip
chart paper taped to the wall or even drawing a free hand chart with colored
nonpermanent tape and then writing the title for each on a large sticky note. Get
creative and have fun.

Weighing different opportunities

Identifying the type of opportunity you think you may have is important to make sure
you’re working on a product idea in the right way . There are some opportunities that may be very straightforward, while others may be much less well-defined. A good way to get a handle on this is to use the product and problem quadrant (see Figure 7-5 ).

Remember When you first look at a potential product idea, you need to understand it from two points of view:

• Problem: Do I truly understand the problem that I’m trying to solve? How much of the problem is defined/understood, and how much isn’t well understood at any level? A problem that is not well understood is considered to be an undefined problem.
• Product solution: How much definition do I have around a possible product solution?How much of the product solution is defined, and how much is yet to be defined/understood?

Using the product and problem quadrant in Figure 7-5 , the following are definitions and
examples for each quadrant:

• Type I: The problem and the product solution are both defined. If you’re the product manager for word processing software at version 10 and looking to develop version 10.1,the problems your customers have are likely to be very obvious. Customers for the last 20 years have decided that they need to create written documents and that word processing software is much easier to use than typewriters. As you search for more features to add or ways to make the product easier to use, you can be sure that whatever product solution you find is on the right track as long as it tests well with customers. Luckily , most product managers find themselves managing the relatively less complicated Type I products and never think twice about how difficult it is solving for solutions where the product or the problem are not defined.
• Type II: The problem is defined, but the product solution is undefined. As with the example from Type I, customers need to create written documents. Rather than proposing a well-understood solution like a computer with word processing software,perhaps you want to explore products that write documents without a keyboard. How else can customers achieve this goal? What if they make gestures in the air? Talk? Solving this problem has become undefined. Any possible solution in this quadrant usually needs extensive validation before you can really believe that the solution will work for customers. A classic example of this was the iPad. The problem was how to consume content like books and movies where you could hold the product easily and not need a battery for long periods of time. The iPad represented an undefined product solution that solved the problem in a new way and created a new market.
• Type III: Here, the cart has come before the horse, so to speak. You have a defined solution; you just aren’t actually sure you have a defined problem for it to solve. One of your engineers might have come up with a great solution based around emerging technologies. The proposed product or product idea does something. Y our job now as a product manager is to make sure that whatever it does has value to customers. This area is a graveyard for lovely techie products that no one really needs but that engineers built because they seemed “cool”. If your idea is in this space, validate with customers over and over again to make sure that you have defined the problem that you’re solving.
• Type IV : The problem and product solution are both not clear , or at least only vaguely defined. You may never have to deal with a product in this quadrant. One example of Type IV product is Twitter before it launched. What problem does 140 characters solve? How does the product solution best match up to the customer problem? Did anyone know that many people are interested in publicly sharing minute moments and thoughts of the day? If they did, did they imagine that the product would need pictures, messaging, and followers? Establishing a product like Twitter isn’t a juggling act; it’s more like spinning four plates on sticks while riding a unicycle over bumpy ground. One misstep, and it all fails spectacularly . Type IV products require an extreme level of flexibility and a willingness to adjust both the problem definition and the product solution simultaneously .

Applying Scoring Models

Scoring models are flexible tools used to establish where customer value lies and in what order you should solve customer problems. They help you to determine where your
engineers should focus their efforts both short and long-term.
The following sections cover various scoring models; try out different ones and see which works best to tell your product’s story most effectively .

Scoring for differentiation: The Kano model

You can win in the marketplace of products in basically two ways: Make it cheap or make it different. Y our company should already know which space its products play in. At IKEA, for example, each development project starts with a final cost. The company knows its customers are looking for a low-cost solution and develops products accordingly . A luxury handbag, on the other hand, starts with a concept of how different it can be from other handbags on the market, and the designers spare no effort or expense to make something unique.

Remember Most products are somewhere between these two extremes. The key idea here is that customers select one product rather than another . The Kano model is a way to categorize features of your product to get a better handle on how your product fits
one of the extremes. In the Kano model shown in Figure 7-6 , any product feature or
benefit fits into one of three categories: must haves, performance, and delighters.

• Must haves: A feature in the must have category constitutes the bare minimum. When you buy a car , you expect it to have a heater and brakes. Y ou wouldn’t buy a car without those features. Delivering a well-done must have feature doesn’t leave customers thrilled with your product. Deliver a poorly done must have feature and customers are unhappy
• Performance: A performance feature is one where more is considered better . More engine horsepower in a car is, generally , perceived to be more valuable. For a different customer , great gas mileage would be a performance feature. The better the gas mileage, the happier the customer .
• Delighters: Delighters are the features and benefits that cause customers to go “Wow!” In today’s cars, delighters may be a rear-facing camera and self -parking features. These bells and whistles are the ones that give customers a reason to choose one product rather than another .

How would you define features and benefits of your product with the Kano model? Beware if you have no delighter features; when that’s the case, you’re competing on the strength of your brand or maybe only on price.

Here’s the real kicker about the Kano model: Any feature that’s a delighter today
will become a must have in the future. At one time, heaters in cars were a delighter ,
but that day is far in the past. It’s a never-ending search for the next delighter
feature.

In the Kano model, having delighters that meet more and more needs increases the overall customer satisfaction. On the other hand, must haves are mandatory to ensure customers are not dissatisfied. And performance is in between — delivering performance features can increase satisfaction but not as much as delighters.

Scoring for efficient use of development resources:
Value versus effort analysis

In many instances, you’re prioritizing many opportunities and have a sense of how much
effort each of these activities requires. In order to choose the opportunity that provides the most bang for the buck, you’ll often want to choose the one that takes the least amount of development time and money while providing the highest value to customers. Four-quadrant value to customer analysis (shortened to value versus effort analysis) allows you to quickly and easily do this.

When you use value versus effort analysis (see Figure 7-7 ), it quickly focuses your
mind on how much value an activity or feature provides and how much time, cost,
risk, or effort it takes to get the result. The value versus effort analysis takes
advantage of the fact that humans are great at comparing alternatives and not so
good at accurately evaluating one item on its own.

When all the options are placed in the correct quadrant, you can then focus your attention on which opportunity to choose:

1. Quadrant IV : High value, lower cost or risk
2. Quadrant II: High value, higher cost or risk
3. Quadrant III: Low value, lower cost or risk
4. Quadrant I: Low value, higher cost or risk

Filling out a prioritization matrix

The four-quadrant analysis is wonderful if you can simplify the decision to two different
axes. (Head to the preceding section for more on the four-quadrant analysis.) However , if you’re weighing more than two factors, the prioritization matrix in Figure 7-8 is a more
useful tool. Instead of two ways of evaluating options, you have up to six different criteria. With six criteria to choose from, at least one or two can focus on the strategic value of a particular option and give a stronger voice to more long-term aspects of an option. Each criteria can have a different weight as long as the total of all weights is 100 percent.

On the left side, you list all the possible ideas; the next two columns have space for more
detailed information about the particular idea in question. Each idea is then judged using
each criteria on a scale of zero to five, where five is the top score. On the right-hand side,
the spreadsheet keeps score. In this example, the top score is 60; your company should
work on priorities with or closest to this score first.

Using the prioritization matrix is great when you have a group that can’t decide on
anything. Because the pieces are broken down into such small decisions, the final
decision pulls out the group consensus and knowledge.

The prioritization matrix is part of the Product LifeCycle T oolkit (included as a free
download with this book; see the Introduction, page 4, for details). The criteria that
are already in the matrix are pain for user , percentage of customers impacted, upsell
revenue for existing customers, revenue from new customers, key product
differentiator , and competitive necessity . Change them to better suit your needs.

Collecting ballots: Dot voting

Dot voting is another simple way to prioritize opportunities (as well as options such as
ideas, features, time, or next steps.) Give each person one to three dots. In general, more dots are needed if there are more options to choose from. Have all parties place their dots to make their priorities known; people strongly invested in one priority can place all their dots next to that option. For example, in Figure 7-9 , a group is prioritizing the top two choices for dinner . Each person has two dots and places them next to whatever option they prefer .

At the end review the selections made with the group to ensure no one is crucially
unrepresented. For example, in this selection of dinner options, going with either of the top two choices leaves a lone vegetarian to starve. In this case, the group may reach a
compromise for lasagna and vegetarian stir fry .

If you don’t have physical dots, give people colored markers and ask them to draw
their own circles.

Buying features

If you need to understand how valuable a particular feature is, having your customers
spend cold hard cash (or some facsimile) on them is a great way for them to make trade-offs. Give each customer a fixed amount of play money to allocate to the features that are available. If a feature is worth a lot to people, they spend more money on it. Less valuable features receive less money . Try it out on T able 7-2 , pretending you have $100 to spend on smartphone features. How much is each feature and the associated benefit worth to you? Do you know someone who would have a dramatically different answer?

TABLE 7-2 Buying Features Worksheet

Smartphone Feature	Amount You’d Pay for This Feature
Fingerprint access without having to type in a passcode
Smudge-free screen
Wireless headphone access: No need to physically plug headphones into your phone
Ability to pay for items by holding your phone to a reader
Total (not to exceed $100)