Business and Product Strategy - Part 3: A Portfolio of Product Iterations?

Seth Godin wrote a quick, poignant post on Starbucks recently:                        

Here's today's entrepreneurial trivia question:

Even after Starbucks had five stores and more than 20 employees, which item was unavailable for purchase at their stores:
Espresso
Hot Coffee
Biscotti
Frappucino® blended beverage

Actually, it's a trick question. The answer is 'all of the above.' It wasn't until several years after the company was up and running that they realized it would be a good idea to sell any beverages at all. All they sold was beans (but you could get a free taste of coffee if you asked nicely).

It might not be too late to fix your marketing/story/product mix.

It could be argued that one should always be fixing their marketing/story/product mix.  The fact is for many start-ups, small businesses, and inventors, it may not be possible to capitalize on a HitForge kind of strategy in which a portfolio of businesses (or products) are cooked up all at once and thrown against the wall to see which one sticks.  The issue is bandwith.  Early on, there is only so much bandwith to go around at a given point in time in terms of giving one product and business the time and resources necessary to see it through, let alone a portfolio.   

But a major problem that often plagues companies that don't take the portfolio approach is that they throw everything into the exact opposite approach: they produce one static product based on company-centric development.  Companies often see the product development process as something that is centered upon themselves and happens only in the beginning stages of a product.  They focus on first customer ship, rather than getting the product right in the eyes of the customer and making sure a market exists that will pay for the product.  If the product is launched and does not reach certain milestones quickly, it is dropped as a failure and company resources are directed to the next company-centric product.

But, one could think of one-off ideas as a linear portfolio of product and concept iterations that are continually being honed for success.  And they aren't being honed by you or people in your company.  You are led through the honing process by empathic interaction with the intended users.   And you hone in on the winning product amidst the portfolio of iterations by continuing to test it and all sorts of variations of it, even when your product is experiencing marginal success.  You start with a solution to a need in the beginning, in the form of the first product iteration, and let your customers lead you through the many steps of realizing the solution in the best, most lucrative form possible. 

In Steven Gary Blank's, The Four Steps to the Epiphany, the author lays out his theory that successful startups tend to implement a customer development process along with the product development process.  The idea being that the two must work in concert and prevent the all-too-common "fire, aim, ready" strategy, in which companies develop a product first and then put it on the market convinced that it will hit.  Blank notes that while the originators of the idea or product concept come up with the first iteration, the company must get beyond feature lists and focus groups, and go outside the building to validate whether there are customers and a market for it.  The cash-burn rate is kept low while going through this process and nothing is scaled up until a viable product finds a paying customer through a viable channel.  Most ultra-successful inventors and businesses that I have come across never stop this process.  There is not one chance in a product, but perhaps an evolution through 3, 5, or 10 possible iterations to fill a need successfully.  You have a portfolio of test results.

Is your product Starbucks just before they decided to try something different and sell beverages? 

Here's today's entrepreneurial trivia question:

Even after Starbucks had five stores and more than 20 employees, which item was unavailable for purchase at their stores:
Espresso
Hot Coffee
Biscotti
Frappucino® blended beverage

Actually, it's a trick question. The answer is 'all of the above.' It wasn't until several years after the company was up and running that they realized it would be a good idea to sell any beverages at all. All they sold was beans (but you could get a free taste of coffee if you asked nicely).

It might not be too late to fix your marketing/story/product mix.

It could be argued that one should always be fixing their marketing/story/product mix.  The fact is for many start-ups, small businesses, and inventors, it may not be possible to capitalize on a HitForge kind of strategy in which a portfolio of businesses (or products) are cooked up all at once and thrown against the wall to see which one sticks.  The issue is bandwith.  Early on, there is only so much bandwith to go around at a given point in time in terms of giving one product and business the time and resources necessary to see it through, let alone a portfolio.   

But a major problem that often plagues companies that don't take the portfolio approach is that they throw everything into the exact opposite approach: they produce one static product based on company-centric development.  Companies often see the product development process as something that is centered upon themselves and happens only in the beginning stages of a product.  They focus on first customer ship, rather than getting the product right in the eyes of the customer and making sure a market exists that will pay for the product.  If the product is launched and does not reach certain milestones quickly, it is dropped as a failure and company resources are directed to the next company-centric product.

But, one could think of one-off ideas as a linear portfolio of product and concept iterations that are continually being honed for success.  And they aren't being honed by you or people in your company.  You are led through the honing process by empathic interaction with the intended users.   And you hone in on the winning product amidst the portfolio of iterations by continuing to test it and all sorts of variations of it, even when your product is experiencing marginal success.  You start with a solution to a need in the beginning, in the form of the first product iteration, and let your customers lead you through the many steps of realizing the solution in the best, most lucrative form possible. 

In Steven Gary Blank's, The Four Steps to the Epiphany, the author lays out his theory that successful startups tend to implement a customer development process along with the product development process.  The idea being that the two must work in concert and prevent the all-too-common "fire, aim, ready" strategy, in which companies develop a product first and then put it on the market convinced that it will hit.  Blank notes that while the originators of the idea or product concept come up with the first iteration, the company must get beyond feature lists and focus groups, and go outside the building to validate whether there are customers and a market for it.  The cash-burn rate is kept low while going through this process and nothing is scaled up until a viable product finds a paying customer through a viable channel.  Most ultra-successful inventors and businesses that I have come across never stop this process.  There is not one chance in a product, but perhaps an evolution through 3, 5, or 10 possible iterations to fill a need successfully.  You have a portfolio of test results.

Is your product Starbucks just before they decided to try something different and sell beverages?