Module 3: Solution & Differentiation
Once you have a solid understanding of the target market, the needs and wants of the end users and economic buyers whom you serve, and the pain points that they are facing, you are ready to move on to solution space. Your work in building knowledge about your market and customer will become your GPS in guiding you towards developing a Minimum Viable Product (MVP) that truly solves the problems your customers are facing, and brings demonstrable value to your economic buyers. Only then will you have the basis of a viable business venture.
In this module, we will cover three key topics.
- Defining your MVP: We will cover efficient ways to define your solution for both internal and external use.
- Building your MVP: We will cover basic principles of product design, product development and project management.
- Testing your MVP: We will cover techniques in usability benchmarks, digital experimentation and more.
Product definition
The first step in developing a solution is to define it effectively. According to best practices in design thinking or user-centered design, the best way to define a product is to start with the user’s perspective and let their needs and wants guide the definition and prioritization of functional requirements. This means that the product should be defined in terms of what it does for the user and how it makes their lives better – not in terms of what the product does from a feature set standpoint, and how it is built from a technical standpoint.
Following are some common artifacts that we use in product management to define the product.
High level product specification
In the book “Disciplined Entrepreneurship”, Professor Bill Aulet of MIT advocates the development of a high level product specification. The basic idea is that you put everything anyone needs to know about your solution on a single page – this could be a slide, a single page landing page, or a tri-fold brochure. This practice is highly effective because it forces the founding team to clearly communicate and align their vision about what it is that they are building to serve their end customers, and why. The one page format also enforces the discipline of being clear and concise about the benefits that the solution offers to its end customers.
Professor Bill Aulet provides free access to an editable worksheet that you can use to develop your product brochure.
Storyboard
Storyboards that capture the step by step workflow of the end user is extraordinarily helpful in guiding product design and development. It lays out what the end user is trying to do at each stage and is a far better way to help the product team envision what needs to be done so the end user can get their job done – and not end up missing a feature or two that breaks the workflow.
UX Booth has a great article that outlines what a storyboard is and how it helps define the product.
User stories
In modern software development the “user story” has emerged as the #1 way that software teams can define a feature. A user story can be thought of as a component of a user workflow that is documented in a storyboard.
According to a great article from Atlassian, a SaaS company that creates Jira (the market leading software ticket management system):
“A user story is an informal, general explanation of a software feature written from the perspective of the end user. Its purpose is to articulate how a software feature will provide value to the customer.”
Additional product definition templates
There are many other artifacts that are commonly used in product management. Professor Elaine Chen of Tufts has a presentation on Slideshare that provides examples of some of these artifacts. Templates for many of them may be found in the Templates folder on the Tufts Entrepreneurship Center shared Google Drive.
Competitive advantage
For new venture creation, your solution needs to be different and better than anything else that the customer can adopt. The customer is comparing your solution to what they are doing (or not), not against the companies and products that you consider to be your competitors in your industry sector. Both analyses are important sources of insight.
In this section, we will share how you might map both analyses and use this knowledge to inform how you might frame your differentiation & build your competitive advantage.
Competitive 2x2 - customer perspective
The customer’s perspective of how you stand against the alternatives that are available to them can be easily mapped on a 2×2. The axes represent the top two priorities for the customer – not the top two features or technical performance metrics that you believe will differentiate you from the competition. Remember – doing nothing differently is always an alternative. Also note that when making this type of 2×2 matrix you always want to place your solution up and to the right. What that means is that you will need to get creative about how you name your axes – for instance, if affordability is a key concern, you would write “affordability” on the Y axis and label the bottom “low” and the top “high” – instead of writing “Product cost ($USD)” and allowing the cost to go high as they typically would on a Y axis.
Competitive 2x2 - industry perspective
The industry sector’s perspective is also important to map. This is of much less interest to your customer but is helpful for you to make strategic decisions on where to play and how to win, depending on how crowded the market is, and whether any of those companies have some type of special sauce (be it a technology, a pre-existing user base, or synergies with other product lines) that might give them an operational advantage. If you are raising money from investors, they will expect you to understand your competitive landscape and further expect you to be able to defend your position and explain how your own special sauce gives you a competitive advantage against your competition. You can use the same 2×2 template for this analysis. In this case, the axes would not represent the customers’ concerns, but would represent the top two strategic considerations that will drive business-level decision making.
Building a business moat
According to a terrific article from CB Insights: “A business moat is a key competitive advantage that sets a company apart from its competitors. From Amazon and Uber to Starbucks and Disney, here are how 19 of the world’s biggest companies have built and defended their moats.”
Unique value proposition (UVP)
Understanding what it is that you are building and why, and developing a strategy for your competitive advantage are two pieces of the puzzle. The last piece is to clearly articulate your unique value proposition (UVP) (also known as unique selling proposition, or USP).
This is critically important and often overlooked by entrepreneurs as they tend to rattle off a list of 5+ features. Customers don’t care about features. They care about benefits. They also don’t want to hear 5 benefits, they want you to lead with the #1 benefit that solves their #1 problem. This section helps you do just that.
Unique value proposition (UVP)
Unbounce has a good article that defines the unique value proposition (UVP), aka unique selling proposition (USP), thus: “Also known as a unique selling proposition (USP), your UVP is a clear statement that describes the benefit of your offer, how you solve your customer’s needs and what distinguishes you from the competition. Your unique value proposition should appear prominently on your landing page and in every marketing campaign.”
Moore's Positioning Statement
Of all UVP/benefit statement templates the Moore’s Positioning Statement is probably the most succinct and effective because it pulls everything that you need to know into 1 page, and again forces you to be clear and concise. This positioning statement was first introduced by Geoffrey Moore in his iconic book about innovation, titled “Crossing the Chasm”. It makes sure you are able to state who you are serving, what their needs, goals and pain points are, what your solution is and what category it falls under, and how it is different and better than the alternative.
[VIDEO] Udacity on Moore's Positioning Statement
Product design
Product design is chiefly relevant for ventures in general technology – if we define a product or service as a system that includes hardware and/or software, then product design is the discipline where we translate user needs and wants into something that guides the user’s experience when using the product or service. For physical products the discipline is typically called industrial design. For software products the discipline is variously called user experience design, interactive design and many more. Product design is relatively less relevant for biotech ventures (such as Strand Therapeutics – a cancer therapeutic company) or tough tech ventures involving things like materials or processes (such as Liquiglide – nonstick coating for the inside of plastic bottles for thick liquids like glue).
Read on to learn about different aspects of product design.
Product design for hardware
Product design for hardware is often covered by industrial designers. The Industrial Design Society of America (IDSA) defines industrial design as follows:
“Industrial Design (ID) is the professional practice of designing products, devices, objects and services used by millions of people around the world every day.”
Product design for software
Product design for software is often covered by user experience designers. Hubspot has an article that defines what a product designer does in an enterprise software company as follows:
“A Product Designer is someone who uses the different facets and tools of design to create and execute a solution that solves for a user’s experience deficiencies.”
[Book recommendation]: Envision Products
Karen Donoghue, Founder & Principle at Humanlogic, just published a fabulous book titled “Envision Product: Uuser Experience for Founders”.
[Book recommendation]: UX for Lean Startups
Laura Klein, Founder & Principal of User Knows, has several books on the topic including one titled “UX for Lean Startups: Faster, Smarter User Experience Research and Design” that not only covers UX design but also covers a lot of the basic user research techniques.
Product development
Product development refers to the actual technical work involved in bringing a product or service to the market. In most usages of the word, the discipline of product development includes product design itself as it spans the gamut from concept to market release and beyond.
In startup circles the Lean Startup / Agile methodologies are very helpful, however, applying these frameworks and principles naively to a venture without considering the type of product is not helpful. For instance there is not one answer to the question: “How long would it take to bring a product to market?” Hardware tends to take longer than software. Industrial hardware tends to take longer than consumer electronics. Enterprise software takes longer than consumer software. Biotech is its own category altogether.
Read on to learn more.
The Agile Product Development Process
Most companies that do product development for software utilize some variant of the Agile Software Development Process. This is very popular in startup circles and the fundamental concepts and rituals apply in the abstract to many other types of products and services (and even for non-product teams). Professor Elaine Chen has an explainer article titled “Agile Primer for Cowboys and Hardware Folks” that outlines what Agile is all about.
[Free E-book]: Product development for hardware
Professor Elaine Chen has a free downloadable e-book titled “Bringing a Hardware Product to Market: Navigating the Wild Ride from Concept to Mass Production”. It was written in 2015 and the supply chain landscape has changed substantially especially in Asia. Since 2015 Shenzhen, China has become a disruptive force in accelerating the time it takes to bring a product to market – all of which became disrupted from early 2020 onwards due to geopolitical developments as well as widespread supply chain disruption due to the pandemic. Make sure to do some follow on research to understand where things stand today.
[TEXTBOOK RECOMMENDATION]: Product Realization
Professor Anna Thornton has a comprehensive textbook titled “Product Realization: Going from One to a Million” that goes into all the details of how to take a product from prototyping stage to mass production.
Product vs. Project Management
Many first time entrepreneurs confuse three roles: Product manager, Product owner and project manager. These are very different roles.
- “Product Manager”: According to Agile Insider, product managers are in charge of product strategy and product roadmap. They incorporate knowledge about the market/customer to guide product definition and positioning. They manage tradeoffs between customers/UX/tech/business needs to optimize outcomes.
- “Product Owner”: The product owner manages the “backlog”, i.e. a list of things to be done by engineers. Product owners communicate product mission/vision/customer needs to developers on a daily basis.
- “Project Manager”: Manages timeline, deliverables, balances resources, tracks progress against plan.
Product managers and product owners
Atlassian, a market leader in software life cycle management software based in Australia, has an excellent article together with an explainer video that demystifies the product manager and product owner functions.
Project management
Forbes has a good article that explains project management as a discipline.
Rapid prototyping
One key tenet in modern product design and development is to stay nimble and be able to quickly create a prototype to test with your end customers. The key idea is that the prototype does not need to be perfect – in fact, the prototype does not even need to work in the early stages. As mentioned earlier, the starting point for a product prototype is often just a high level product specification or a landing page. However at some point you will need to graduate to something more tangible that you can test with customers. This is where rapid prototyping comes in (for hardware and software alike).
Rapid prototyping for hardware products
For entrepreneurs creating a new product from scratch, you will start with rapid prototyping and will likely stay with low volume fabrication and manufacturing techniques until you have validated your market and customer, developed a business case and validated purchase intent and pricing. Formlabs has an amazing article that explains everything you need to know about rapid prototyping.
Rapid prototyping for software products
Contrary to common misconception, the first step to building a software product is almost never to build the software product itself. You will go much faster and much further if you utilize rapid prototyping techniques. Product Plan has a great article on rapid prototyping that explains how.
[Book recommendation]: UX for Lean Startups
Laura Klein, Founder & Principal of User Knows, has several books on the topic including one titled “UX for Lean Startups: Faster, Smarter User Experience Research and Design” that not only covers UX design but also covers a lot of the basic user research techniques.
Stakeholders & personas
When you are building a new business, you need to consider the full suite of stakeholders who may be involved in making a buying decision. These stakeholders may include:
- Economic buyer or decision maker: The person who authorizes the sale
- Champion: The person(s) who advocate for your solution to the economic buyer/decision maker
- Influencer: People that the economic buyer or champion consult for input about the buying decision
- End user: People who use the solution
- Veto power: People who can shoot down the whole thing
Sometimes one person can occupy more than one stakeholder role. For B2C businesses the end user may be the economic buyer. For B2B, it can get complex.
To build knowledge about each stakeholder, we conduct detailed interviews and/or do shadowing research, then create a fictional, composite description called a “buyer persona” that summarizes key takeaways. Following are some articles that help you create buyer personas.
Defining your hypotheses
Ben Yoskowitz, author of Lean Analytics, has a great format for this:
I believe [target market] will [do this action / use this solution] for [this reason].
The reason why this works is because it forces the entrepreneur to develop clarity around key concepts that matter.
- Target market: What is your target market? if you cannot state that you cannot find people from within that market to test your hypothesis.
- Observable action: What observable and measurable behavior do you think you can elicit from your target market? This is utterly critical because by now, you will have done a lot of detailed interviews and you will know a lot about your customer – but all of it is through their words. People will often say one thing and do something else. On the other hand, if your hypothesis involves an observable action, you can set up an experiment and try and get your research subject to do that action. Whether they do it or not gives you much more accurate data about the likelihood that you are on the right path.
- Reason for action: Why do you believe your target market will do the action? This you can check AFTER your target market does or does not perform the action to see if you are right or not. Stating it up front clarifies your assumptions about why it is that your target market will do the things they do and again, this is critical knowledge that can guide you towards problem-solution fit.
The Riskiest Assumption Test (RAT)
When you think about your hypotheses you will often come up with a very long list. Which one should you tackle first? That’s where the riskiest assumption test (RAT) comes in.
The RAT is the assumption that, if proven wrong, will make the whole venture fail. A lot of people define the RAT in a broad term that requires building the venture to test it (and it takes months if not years). That is the wrong approach. The right approach is to write out all your hypotheses, see which one is the riskiest, then see what you can do about deconstructing that RAT into its components and then see which component is the riskiest… and rinse and repeat.
Hackernoon has a great article that discusses this methodology.
Read on to learn more.
Lean Experimentation
Lean Experiment is the discipline of approaching hypothesis testing like a scientist. At the highest level the steps to lean experimentation includes:
- Defining your hypothesis that you want to test, in the format listed above
- Define your Minimum Viable Product (MVP) – remember, this can be a napkin sketch and is almost never a real “product” for the first go-around.
- Define the experiment: This is the actual interaction with your experimental subject to get them to do the action you want them to do
- Define the duration: Experiments should be time boxed (3 days… 2 weeks…) so know you areyou are collecting data for that period of time
- Define the currency: State the action you are trying to extract from your subject – it can be a 15min call, an email, or actual money. Something that is important to them that they value. This is the single most important concept of using lean experimentation for venture validation – if none of your subject will not give you what you want them to give you, you need to get back to the drawing board and rethink your strategy.
- Define the threshold: State what results you expect to see at the end of your experimental period.
For example: You could offer to do an infosession about a new product or service. Your MVP is a landing page with a lead form for that new product or service. Your experiment is to put out a call to action to a list of 50 people via email to get people to sign up for the infosession. The duration can be 1 elapsed week. The currency is the email signup. The threshold can be 25% of people sign up for your infosession.
There you have a concrete experimental design that does not take a lot to implement, and it will give you valuable data based on an action the potential subject undertakes.
How to do lean experimentation
Brent Cooper, author of the best selling book “The Lean Entrepreneur” and many more and also the founder of Moves The Needle (a Lean Startup consulting company), has a really excellent article with many real life examples of lean experiments.
Problem-solution fit
There are three sanity checks to help innovators and entrepreneurs ensure they are not building something nobody wants:
- Problem solution fit
- Product market fit
- Business model fit
Problem solution fit is the first one to check with end users. It challenges the entrepreneur to ask whether they are really solving the problem that their customer is experiencing – and importantly, whether the customer themselves think that your solution solves their problem. Without problem-solution fit there is no point in proceeding to build out the rest of the business.
Strategyzer has a great article that talks about all three sanity checks.
Additional Resources
Educational Videos
View recorded Zoom videos from an entrepreneurial bootcamp held at DEC covering time tested entrepreneurial concepts
Self-Guided Accelerator
Follow the structure of our 10-week-long accelerator and make progress on your venture
Pitching resources
Learn to put forward your very best pitch
Templates
See our custom curation of templates for executive summaries (aka one pagers) and more