Tuesday, February 5, 2013

Approach to Market Validation

I was recently talking to a California company about moving their products into the enterprise security space. The company has some really interesting data analytics capabilities that correlate complex relationships in big data. Below was my first go at documenting an approach for how I might attack the effort. I've been a student of the market validation process, and - to give credit where credit is due - I have included references below. Also, thanks to David Telleen-Lawton (and his 20 years of market validation experience) for feedback on this.

Overview of Market Validation Approach
Market validation is a structured process in which new product offerings are validated in terms of customer need and product requirements. The process provides a rapid, structured and repeatable approach to vetting ideas, identifying potential customers, market segments and messaging, while quickly determining the Minimum Viable Product (MVP) feature-set such that a viable product, business model and sales approach can be quickly identified. The antithesis of this approach is to define requirements in a vacuum after unstructured feedback from 5 meetings, spec out an expensive v1.0 product release, build it for a year only to find out that you built something that nobody wants. Or talking to 10 customers and identifying 10 “must have features” and building a product that only 10 customers will buy. The market validation thinking is more about quickly getting customer feedback and iterating the product (back of the napkin, diagram/presentation, mocked-up demo, prototype, beta version), such that when version 1.0 is released you know you are solving a generalized problem that customers will pay for - and you will have tested the messaging, know the sales requirements/channels and have tested the pricing. In fact, ultimately, you’ll already have your first paying customers lined up before you release v1.0. The process as outlined below (the timeline is measured in weeks, or a couple of months) begins this iterative process and defines the product, customers, problem and product-market fit, but the process should really continue into perpetuity as the product continually evolves. If the real estate mantra is location, location, location, then the market validation mantra is, get-in-front-of-customers, get-in-front-of-customers, get-in-front-of-customers!


The approach for an early stage concept (such as “how can we apply our technology to the commercial/enterprise security market”) would require both Phase 1 and Phase 2, below. For an idea that is more evolved (“we want to build a specific product that has these rough features for this market”), the process might begin at Phase 2.

Phase 1: Identify 1-2 High Priority Product Ideas

The approach I would recommend would be to do a facilitated brainstorm session with the product team in which the identification of problems to solve along with potential productized-solutions would be determined. Then we’d initiate a wave of customer market validation meetings to validate whether this is really a problem that hundreds of customers in the target market have rather than one in a hundred, how they solve it today, that they will pay us to solve that problem, identify messaging, identify competition, likely Minimum Viable Product (MVP), and identify what we don't yet know.

Step 1: Brainstorming
  • Day 1 (half day): brainstorm, quantity of ideas over quality (afternoon)
  • Day 2 (half day): reduction of ideas (the next morning)

Step 2: Initial product validation and customer development

Step 3: Review Step 2 findings with the team.  Duration 2-4 hours

This is where results are reviewed: does the preliminary product spec solve a real customer problem? Is this a big/real problem? Were there any big surprises? What were key lessons learned? Do we really understand the problem that customers have? Do our features address this problem? Do we really understand customer workflow? How do they currently address the problem? Competitors?  Who in the organization feels the pain (individual, group, department)? Who is the buyer? Is there an influencer or outside decision maker? Is the user the same as the buyer? Are we creating a new market or segmenting an existing one? If it’s segmenting, then what are our key differentiators (features, performance, pricing, ease-of-use, platform)?

Objective: Determine if there is a consensus to proceed to Phase 2.

Phase 1 deliverables: Provide document and presentation deck (onsite) noting all findings and discussion of which, if any, to pursue into Phase 2. Findings include: Potential MVPs, List of critical features, key marketing messages and positions, typing of companies that are receptive, targets within companies most responsive, etc., initial market sizing, problem we solve, current solutions, backlog of interest. Business model description with current product/market hypotheses.

Phase 1 objective: Identification and clear understanding of problem and solution for one or two product opportunities.

Phase 2: Market Validation (for Phase 1 winners or already existing "winner" product idea)

This phase is similar in spirit and approach to Phase 1 (without the brainstorming), except that with more insight into customer, problem and features, the meetings are more tangible and questions more directed.  The meetings would be led with a presentation/demo (perhaps a graphic, mock-up or prototype, with the tradeoff being the more tangible the product demo the better the feedback, but you want to avoid spending too much time on the demo, as you are trying to optimize how quickly you can iterate through the cycle of feedback and product refinement.

Step 1: Create presentation / demo

Create presentation for prospective customers, make product as tangible as possible in a short timeframe, ID target companies, set meetings. Spending 3 months building out a prototype, for example, might be considered too long at this point, but a week or two development cycle might be appropriate.

Step 2: Onsite customer meetings

A key effort at this stage will to schedule and coordinate onsite meetings. However, an effective approach would be to have 2-3 product team members at each meeting. Ultimately we’d coordinate meetings in waves of 2-3 meetings in a day, 1-2 days a week.  9-11 meetings total.

Step 3: Review meeting onsite

Phase 2 deliverables:  Refinement of Phase 1 deliverables. Targets for sales, market size estimates, feature list by product version, sales model, etc.

Phase 2 objective: Go/No Go for idea. Ready for serious development effort. Well understood business model and product requirements. This phase can be iterated, but ultimately the objective is to emerge with a set of features and product delivery schedule as well as targets for the next wave of validation.... sales. All previous meetings will have yielded potential sales opportunities.


I'd recommend any (all) of these books for anyone interested in a structured product development process.

  • The Lean Startup, Eric Ries
  • The Four Steps to the Epiphany, Successful Strategies for Products that Win, Steve Blank
  • The Startup Owner’s Manual, Steve Blank
  • Business Model Generation: A Handbook for Visionaries, Game Changers, and Challengers, by Alexander Osterwalder and Yves Pigneur
  • Running Lean: Iterate from Plan A to a Plan That Works,  Ash Maurya

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