Product innovation is the process of creating new products that generate increased value for your customers and your company. This means that for products to be successful, they need to solve a pain that customers are willing to pay for. While at the same time generating a significant return on investment for their company. Product innovation is not a destination. It’s a journey. A journey with many twists and turns that starts with an idea and ends with a successful product achieving scale.
But unfortunately, most companies struggle to generate value out of their innovation efforts. In other words, companies big and small waste a lot of time and money creating software products nobody wants to buy. The problem, as mentioned in this HBR article, is not a lack of ideas. Companies have a lot of ideas that sound promising, but they never materialized as innovative products. The problem is not the idea, but the process to turn an idea into a product that customers want to pay for.
Many B2B companies short-circuit the innovation journey either because they believe they already know what the market wants or because they don’t have the skills and processes to be customer-centric throughout the development process.
To increase your chances of success and reduce the risk of launching a product nobody wants to buy, you need to change your perspective. Instead of aiming to go from idea to scale, I recommend focusing on the early stages of the innovation journey: specifically, the stages to take your product from idea to your first ten customers.
Why focus your product innovation only from idea to your first ten customers?
Focusing on your first ten customers gives you the opportunity to dive deeper into the pains of similar customers and fine-tune your product to ensure you can deliver value. In other words, focusing on your first ten customers is the best way to reduce risk and avoid an expensive trainwreck.
In the world of enterprise software, every customer can be very different from each other, even if they belong to the same target market. For example, your enterprise customers might have different organizational structures, legacy systems to integrate with, distinct compliance requirements, etc.
By the time you deliver your tenth pilot project, you will have the confidence that you’ve seen most of the variations you will encounter in that market. You’ll start seeing the same patterns and the same type of challenges across many customers.
Delivering value to your first ten customers doesn’t mean you are ready to scale. It only means that you have an excellent understanding of your customer, and you know you can deliver value to this target market. Ten customers serve as a concrete milestone to start discussions with your leadership team on what the next step for your new product should be.
Making these decisions before delivering value to ten customers is premature and often leads to failure. Besides, if you can’t deliver value to ten customers, how do you plan to get 100 or 1000 customers?
The six stages of product innovation
I divide the journey from idea to your first ten customers into six distinct stages:
- Strategic alignment
- Market discovery
- User discovery
- Solution planning
- Early adopter
The diagram below shows how these six stages work together to map the innovation journey from idea to your first ten customers.
As you can see from the diagram, getting to your first ten customers is an iterative process. Moving from one stage to the next doesn’t mean you completed that stage. It only means that you have strong customer evidence from that stage that you need to put to the test in the next stage.
With every iteration, you might advance one stage or move back one or more stages. And that’s OK. This method ensures you always focus on the most promising ideas and spend the least amount of effort and resources on ideas that will go nowhere.
Below is a summary of the six stages. At every stage, you’ll learn something new about your customer, and you’ll continue to fine-tune your offering until you can deliver value to your first ten customers.
Product innovation, stage one – Strategic alignment
In the Strategic alignment stage of the product innovation journey, you’ll collaborate with your leadership team to explore opportunities aligned with your company’s strategy and agree on a particular customer’s business outcome to explore. Examples of business outcomes include: help your customer reduce their travel expenses, help companies lower their electricity bill, or help companies track assets more efficiently.
Along with that agreement, you’ll define success metrics, secure resources, define your innovation team and advisory board, and agree on how to report progress throughout your journey.
Stage two – Market discovery
In the Market discovery stage, you will explore the market opportunity for the customer’s business outcome you agreed to during the strategic alignment stage. You’ll work to narrow down on a specific target market to go after (including industry, company size, geography, and use case).
You’ll also spend time understanding the characteristics and pains of your Champion (the person in your customer’s organization who is responsible for achieving a business outcome.)
In the market discovery stage, you’ll also research whether the target market you selected is big enough to support your new business.
Selecting a target market does not guarantee you’ll find traction for your product. It only means you have narrowed down your universe of options, so you can deep-dive into the challenges of your customer in this market to understand if your idea has potential or not.
For example, you might discover that the pain in that market is not big enough to demand a new solution or that there aren’t enough companies experiencing the pain to support your business. At that point, you can agree with your company to look into a different market or go back to the Strategic alignment stage to agree on another customer’s business outcome to explore.
Stage three – User discovery
In the Market discovery stage, you selected a target market and identified your customer’s pain. This information is critical for defining a product roadmap, but it is not enough. Now you need to understand the pains and workflows of all the people within your customer’s organization who will use your solution and whose collective output result in solving the Champion’s pain. I call all these different users your user ecosystem.
In the User discovery stage, you will need to identify, research, and prioritize your user ecosystem throughout the enterprise customer journey, from sales to installation, deployment, operations, and more.
Related post: Listen to my podcast interview with Tony Ulwick, as we discuss how to apply the Jobs to Be Done framework to user discovery.
Stage four – Solution planning
Stages one, two, and three of the journey focus on understanding the problem to solve. As well as the market and the people who experience that problem. Stages four, five, and six focus on incrementally testing and developing your solution to address that problem.
The goal of the Solution planning stage is to plan for the work ahead. This is the time to discuss how you and your team will approach testing and building a solution to solve your Champion’s pain.
By planning, I don’t mean the waterfall way of planning. Instead, during this stage, you will:
- Prioritize the users to focus on first.
- Create a solution diagram to get alignment on what you plan to build.
- Create an experiment roadmap to test with your prospects during the Prototyping stage and test with your first ten pilot customers during the Early adopter stage.
This stage also helps you align with your leadership team on your next steps and agree on the support you will need moving forward, including people, funds, equipment, and vendors.
Recommended reading: If you are building an IoT product, check out my IoT Decision Framework. It is a great Product Management tool to define, organize, and communicate the complexity of your IoT strategy.
Stage five – Prototyping
The Prototyping stage focuses on building prototypes to test with prospects in your target market. In other words, it’s about experimenting and getting real-world evidence on whether your solution can solve your customer’s pain.
With every experiment you make, you’ll gain new customer insights to incorporate into a new iteration of your solution. These insights allow your solution to move from sketches to wireframes to low-fidelity prototypes to high-fidelity prototypes until you finally get your first paid customer and deliver a working prototype or beta product.
Experimentation applies to every component in your offering, including your technical solution, monetization model, services, and partnerships. In the Prototyping stage, you need to focus on testing your assumptions across three dimensions:
- Desirability – Does your target market want your offering?
- Viability – Can you make money with your offering?
- Feasibility – Can your company build and operate the resulting solution?
Related post: Listen to my podcast interview with David Bland on how to test business ideas.
Stage six – Early adopter
Getting your first paid customer is a huge milestone. It means that at least one Champion sees your solution’s potential, and they believe you can provide value. But you haven’t demonstrated that value yet. In the Early adopter stage, you’ll work closely with your first ten customers to ensure you can deliver value.
The goals of the Early adopter stage are:
- Demonstrate (in the field) that your solution can solve your customer’s pain.
- Continue testing for desirability, feasibility, and viability as you learn what it takes to deploy and operate your offering.
During this stage, you’ll put together all the tools, skills, and insights you’ve gathered from previous stages and work closely with your first pilot customers to deliver value. You will also start testing your assumptions throughout the enterprise customer journey and fine-tuning your product’s features to deliver on your promise.
The learnings you’ll get from your first customer will be invaluable, but they are not enough for you to know if your offering has potential in your target market. To get more confidence that you genuinely know your customer and that you can solve their problems, you need to deliver the same value to ten customers.
To learn more about the six stages of product innovation
This article is an excerpt of my upcoming book on how to create successful enterprise software products. Get insider information and be the first to know when the book is out by joining my community of Product Leaders.
The Bottom Line
Create enterprise software products is complex, and success is uncertain. Most companies fail because they don’t take the time to understand their customers, or they don’t have a structured approach to guide them through the product innovation journey. By focusing on your first ten customers and following the six stages of the product innovation journey I describe in this article, you’ll increase your chances of success to provide value to your customer AND your company.