How to Conduct a Product Opportunity Assessment
Originally published on The PM Vision [now defunct].
Product teams exist to assess opportunity and capitalize.
Product managers are tasked with finding market problems that are urgent, pervasive within a certain target market, and that people are willing to pay to remedy. Once found, product owners guide the development of a profitable solution to those problems. (at smaller organizations, or for new product initiatives, those duties may be owned by the same person)
Market problems can be solved with new service offerings; new features; new partnerships; or new products. Given limited resources, however, product teams can’t pursue every opportunity. They must prioritize.
In traditional corporate environments, teams conducted extensive research prior to starting a product effort. The business case served to document the context, rationale and revenue potential of a business opportunity.
Over time, it’s been proven that this snapshot of the world is out of date as soon as it’s “completed,” and builds expectations for the solution as-currently-imagined such that pivoting based on market response becomes difficult. While some teams take a truly iterative, lean approach to product development, there are still quite a few who still need to assess the opportunity ahead of time; but there is room to utilize to a more concise opportunity assessment.
Three Approaches to Product Opportunity Assessment
The more significant the investment needed to develop a proposed solution, the more detailed the assessment should be.
Large organizations answering to PE or to Wall Street need to demonstrate profitable use of capital; they’re not rolling the dice. They invest in only the promising opportunities.
In order to invest in only the most promising opportunities, it pays to start working through the sequence of assessment techniques until you’re comfortable the investment decision. The bigger the opportunity, the more thorough the technique, generally speaking.
The three methods I propose in ascending order of thoroughness are:
- Scoring (most applicable for features in an existing product)
- Opportunity Assessment (big features or small products)
- Prototype / Minimum Viable Product (full size products)
The quickest assessment technique is to evaluate your idea according to a weighted scoring formula built into an easy-to-access spreadsheet. This tactic allows ideas to be quickly ranked against each other.
This is often enough when ranking enhancements to existing products.
My friend Jason Brett has shared the 60 Second Business Case , which illustrates this approach very well:
Jason’s approach maps to an existing customer base and product in market, supporting operational necessities as well as thresholds for scoring projected revenue impact. The headings can be modified to apply the evaluation technique to the needs of any product organization.
Scoring opportunities allows a team to quickly focus on ideas worth pursuing, and to filter the rest out.
For ideas that past the first screen, and for those ideas suggesting larger features or a new product altogether, a slightly more involved opportunity assessment may be warranted. Marty Cagan suggests that answers to the following ten questions should comprise the assessment of a product opportunity:
- Exactly what problem will this solve? (value proposition)
- For whom do we solve that problem? (target market) / (user and buyer personas)
- How big is the opportunity? (market size)
- What alternatives are out there? (competitive landscape)
- Why are we best suited to pursue this? (our differentiator) / (Do we need to partner?)
- Why now? (market window)
- How will we get this product to market? (go-to-market strategy)
- How will we measure success/make money from this product? (metrics/revenue strategy)
- What factors are critical to success? (solution requirements)
- Given the above, what’s the recommendation? (go or no-go)
I advocate completing a business model canvas or lean canvas as part of assessing the opportunity as well, and considering the business strategy stalwart, the SWOT. (or a Product Canvas!) The canvas should include key elements like:
- Solution – To elaborate on solution requirements, include a short description of the solution itself to keep everyone on the same page.
- Weaknesses – A standard prompt from the SWOT: What things that we aren’t good at should we consider?
- Threats – This one might overlap part of Porter’s 5 forces: Is this an easy market for others to enter?
In some cases, to clearly communicate the product idea being considered, a rough sketch of the solution is useful. A visual illustration of the product concept in wireframes, along with a list of key workflows, can ensure meeting of the minds. This is particularly important when this assessment is to be shared within a team.
Prototype / MVP
In a Lean Startup, market testing a proposed product idea at a very early stage offers the opportunity for early learning from that market testing, and then adapting based on the learning. For product concepts that address unsolved problems in new markets, this is another tangible step on the road toward commercialization.
Some questions–such as how much someone will pay, and whether a product workflow matches actual business process–may not be truly answerable until a potential customer can evaluate a prototype in their own hands.
Startups–essentially funded experiments working to find a business model for a new offering–can use the same techniques.
Because their purpose is to experiment and not to be profitable immediately, startups often follow an initial hunch which looks like a basic opportunity assessment, and build an initial product that is offered for sale. (The MVP)
Iteration, rapid development and learning become key, while struggling through the first few customers until enough customers are won to declare product/market fit.
The initial assessment helps frame the MVP and iteration by clarifying where the market is and how big the problem is. The assessment and MVP, in this case, aren’t intended to “prove” profitability as they might be (mis)used in an Enterprise product company. They are intended to discover new markets.
Conclusions and Rule of Thumb
Use the opportunity assessment to try to prove that a given market problem does NOT provide a viable opportunity. There could be many reasons, including:
- Perhaps there isn’t a big enough market segment
- Perhaps the opportunity doesn’t offer enough revenue potential
- Perhaps the opportunity does not line up with your organization’s strengths/strategy.
In any case, it may not make sense to build an MVP; or it may make sense to revise the proposal (pivot) before building anything. If, instead, your results suggest there may be something there, you have one or more hypotheses to test with an MVP!
My general rule of thumb is:
Do as much due diligence as is appropriate for the investment you’re considering.
A quick check of the wind direction might be enough to validate your decision to prioritize features of a product already in market. For a new product opportunity, you’ll want to conduct a more thorough opportunity assessment, in case there are reasons you shouldn’t go forward to the prototype / MVP stage….that will allow you to invest instead in a more promising idea.
Images from: Pixabay