In my recent essay about second products, I talked about how the goal of building a second product is not the traditional concept of product/market fit we’ve all been raised on regarding startups. In some ways, our goal with a second product is easier, and in some ways, much harder. The goal is to inflect the growth of the entire company over time. This is hard, and does not usually unlock easily. This can make it tricky to evaluate as an engineer, designer, product manager or CEO if the investment will bear fruit and whether one should keep going. I’ll explain how I think about these decisions as a product leader and give more context on the journey of developing entirely new products inside a company.
First off, let’s spend a moment on this product/market fit point. If the job is to inflect growth for the overall company at some point in the not too distant future, product/market fit in the general sense may not be enough. Let’s say your second product builds a new product that is growing healthily with a smaller group of customers than the core business at a much lower price point. By general standards, the team found product/market fit, but will never be able to inflect growth of the combined company. This is failure inside a medium to large company.
When the above example is interpreted correctly inside a company, this means teams start to take larger swings that, if they work, can possibly move the entire business eventually and open up new growth opportunities for the entire company. Bigger swings generally mean a longer amount of time building toward something that could work in the future. How much time and money has Meta spent on VR? Amazon on Alexa? Google on GCP? Extreme examples sure, but partially why they are extreme is these companies’ new product development has to move revenue growth at what are now some of the largest companies in the world.
While we are used to startups needing a decent amount of time to find product/market fit (sometimes taking many years), companies that are scaling do not generally think on such long timelines. OKR’s, which most teams use inside scaling companies, are generally measured in cycles of three to six months, which is much too short for a team investing in new products to evaluate success.
A good team will push the company to give them a longer time to journey toward a new product that can be a success. But this just creates another problem. For a team working on what is usually considered one of the most important projects at the company, executives want to hear about “progress” or “milestones.” Are we on the right track, or are we lost in the wilderness?
Good teams working on new products will outline the assumptions they have to prove, in order, and a rough timeline on when they expect to either prove or disprove those assumptions. It’s a shot in the dark, but for territory that is yet unmapped, it gives the rest of the company some waypoints as well as a general estimate of how long the team expects to reach the destination. Even though the team usually knows nothing in reality.
I liken this journey to the myth of finding a rainbow that leads to a pot of gold. We’re saying the rainbow starts here, we expect it to take us through these peaks and valleys, and we think the journey will take a while with lots of unknowns. The most important thing for a team to do at this stage is state what the destination should hold.
The company should know at this point it’s a potential new product with a large enough addressable market, price point, and whatever other strategic dynamics are important to the company that can lead to a new S-curve of growth. Much of the time, this list includes certain weaknesses of the current product suite the new product hopes to mitigate. Such examples are expanding the addressable market for the company, increasing frequency of usage, improving unit economics, etc. This list is important, but often missed in the new product development journey because product teams want to see where their insights take them. I would argue this is a mistake. The destination has to be worth it for a team that may spend over a year developing something new, so we need to align on what “worth it” looks like.
Okay, so you’ve mapped a destination representing a huge pot of gold awaiting the company when you reach it. You also need to map the milestones, usually proving/disproving assumptions in a certain order, and what you expect to achieve along the way. Updates to executives typically focus around these points in time. It’s a convenient way to discuss everything you’ve learned that may be important while getting a general pulse check with the executive team on their excitement around what the team has been working on.
Image by MariaAllen via Midjourney
Inevitably, some of these assumptions will be wrong. Uber thought the best way to launch a food delivery product was to copy some earlier stage startups called Spoonrocket and Sprig that had a limited menu of food that could be delivered in ten minutes. It turned out copying Doordash and Postmates was the more viable option. This sort of pivot is common, and still got them to the destination of a growth market with a large TAM that offset peak times for driver demand and allowed new types of supply that weren’t a great fit to core Uber to also make money driving. It also increased lifetime value and unit economics for the combined business. Pretty nice win.
When these assumptions are wrong, it does not mean the team has done anything wrong. It means the team is developing a feedback loop with the customer and the market and a learning culture inside the team. The waymarkers were wrong in the case of Uber Eats, but the destination was still correct, and the team eventually found a more accurate map to the destination. This is generally how it’s supposed to go.
But what if the learning culture you’ve developed inside the team and the feedback from the market and customer base is not getting you closer to the original destination? This is where things get concerning, and teams get confused on how to move forward. There are a few ways in which this can happen:
#1 The destination is further away than we originally imagined.
In this example, there are many more waypoints the team needs to travel to to reach the destination. Think of it as the road being much longer and windier to get to the pot of gold. At this point, teams need to remap the path, and examine whether the larger investment of time and resources is worth it to reach the destination. Much of the time, the project will get too expensive and time consuming for too small a reward. This happened to us at Pinterest. A team inside the company started building a Q&A product around the Pins people saved to the network. With every investment the team made, the path to success lengthened in many ways, such as the amount of moderation and quality control required when Pinners on the network started asking more questions and expecting serious answers. The team eventually recommended sunsetting the project, and they did. Other times, the reward is still deemed to be worth it, and the team keeps moving.
#2 The destination is the wrong destination or does not exist.
This is a common problem when the new product investment is too business focused and not enough customer focused. Bigger companies can get attracted to product ideas that the band Soundgarden coined “pretty nooses”. As lead singer Chris Cornell (RIP) explained, a pretty noose is “just sort of an attractively packaged bad idea, pretty much, something that seems great at first and then comes back to bite you.” I’m sure you’ve seen them in every Y Combinator batch and in every product brainstorm. Everything the team learns as they work toward proving their assumptions on these ideas is that the market just isn’t there or that the customer pull is not strong enough. This happened with Tinder Social. Matching groups of friends just wasn’t a problem people were that interested in using software to solve. Acquisition is very hard, retention is even harder, and the market seems incredibly small and difficult compared to growing the core business.
#3 The team has veered off track to a new destination.
This problem occurs when the team investing in building new products is too focused on the lean startup path of developing products and fails to remember they are not their own startup, but a team attempting to accomplish a business objective for a larger company. In this scenario, the company has to ask how attractive the new destination that seems to have more traction than the original destination is. I was working with a company recently working on a new product that would address a new market that was higher frequency. All of sudden, the team working on it veered back toward the market for the original target market, for which this product would have too small a TAM and not address any of the new market or frequency objectives we originally had for starting the project in the first place. We decided to course-correct.
#4 We cannot seem to get closer to the destination over time.
This can much of the time be one of the other failure modes, but it’s important to call out on its own. If the only thing the team learns over time is “well, that didn’t work either”, it may be time to shut down the project. New activity on the problem needs to be generating new learning that makes the map to the destination clearer. If all we are learning is we are still going in the wrong direction over time, the chances of finding the right direction trend to zero.
Development of new products with new value props is difficult, and the frameworks for building startups or building other products inside the company often fail to apply to these situations. This makes it super important that teams map their destination, map the territory they expect to go through and map the process they will use, and stay on track for all of those to ultimately make the best decisions to maximize an outcome that meaningfully impacts the company.
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