Innovation framework

Digital products are similar to caterpillars, they need to eat a lot (of mental energy) to be transformed into something else. While caterpillars go from yucky to beautiful, digital products go from “just an idea” to “launched on production”. Same difference, if you ask us.

This is the list of key learnings we need to obtain and answers to these questions that would signal the idea is business viable.

• What is the market size? → The more the merrier, and the higher the purchasing power, the better.
• Do potential customers want this? → This should be a resounding yes.
• Why do potential customers want this? → It should be aligned with our hypothesis, and it should be a considerable pain point.
• Is someone else doing the same or a similar thing? → The good answer here is “no”. We want to be working in a market of one.
• How do we monetize the product? → A clear plan needs to be devised.

The innovation framework is our way of visualizing that process. It’s more of a communication vehicle than something set in stone. It does ensure you get optimal results, but you’re free to tailor the approach to a specific client. As long as you're able to confirm a product passes innovation framework gates, you’re all good.

Gates? Yes, there are some claims about the product you need to validate. This is not just a philosophical exercise, it’s how valuable and profitable digital products are launched. By validating that product passes a specific gate, you’re ready to deploy a new set of exercises and activities to provide value to the client in the next stage.

These gates are no-brainers – they ensure that the idea can make money for the client, meet user/customer needs, and can actually be done using today’s technology. We’re not SpaceX, clients expect to see something in the AppStore within a few months.

Gates

Now we’ll dive a bit deeper into each of the gates and why we set them in this specific way.

Gate 1: Idea is business viable

This involves identifying an opportunity and shaping it into more of a business case than a digital product. We need to think about how this idea would provide value for the client.

There are three general ways it could do that:

• Save them time and money by optimizing some process
• Earn them money by expanding current market share or allowing them to enter some new market
• Provide non-tangible benefits such as brand equity

Our focus is on the business viability of the idea. If the workshop team can’t devise a way to monetize this idea, there’s no point in pursuing it any further. To pass this gate, we’ll do some light touch desktop research and use business and product frameworks to put the idea to paper. This ensures we capture all the risky assumptions and can review and discuss those.

Gate 2: There’s market demand for the idea/solution

Instead of jumping straight to the design sprint, we’ll first validate if the solution has some legs with our target audience. Although an idea might look great business-wise, if no one has the user problem we’re trying to solve, it’ll all come to nothing.

By testing solutions explained in a few slides and sticky notes, we avoid the high prototyping costs while still learning more about our target audience and validating the value proposition.

Think of it this way: instead of designing the Uber app, we start by asking people what annoys them the most when visiting a city as a tourist. If they say it’s public transport and being ripped off by the cab drivers, we’re golden.

Gate 3: Product resonates with the target audience

Once the solution has been validated, it’s time to raise the fidelity of our idea. Now we’ll test if our specific solution to that problem, i.e., the digital product, resonates with the target audience.

The solution might be appealing, but it might need some tweaks, even a slight pivot in the value proposition. This is all much easier done before we start with agile sprints, and there’s no design or tech debt.

We’re trying to design and test the product with the target audience quickly. This higher fidelity of the idea ensures we’re getting the USP right and we’re ready to start planning the implementation of the product.

Gate 4: Such a product can be designed and developed

You passed all three previous gates: the product makes sense business-wise, there’s market demand, and our product seems to address that demand. We “just” need to define how we will bring it to market. It’s no longer “why” and “if”, but “how” and “what”.

We must create an activities roadmap that’s feasible tech- and operations-wise. Tech needs to be able to support such a value proposition, and both clients and our teams need to be able to execute that product vision.

Lean canvas

“Lean” comes from the concept of a lean startup – meaning you’re doing just enough to be able to market and sell the product. No bells and whistles, only the absolute core of your product’s offering. Lean canvas is here to document your assumptions and iterate through them if needed.

Canvas consists of 11 areas, you need to fill all of them with data:

• Problem: Clearly define the problem or pain point that your product aims to solve. Be specific and focus on a single core problem. Don’t make stuff up, do the research on the problem.
• Solution: Describe your product or solution that addresses the identified problem. Keep it simple and explain how your solution uniquely solves the problem. Remember, at this stage, the solution may still be a hypothesis or early concept.
• Key Metrics: Identify the key metrics that will help you measure the success of your product. These metrics should align with client’s business goals and provide insights into AARRR (acquisition-activation-retention-referral-revenue) metrics.
• Unique Value Proposition: Clearly articulate the unique value the product offers to customers. What sets us apart from competitors? Why would customers choose your product over alternatives?
• Channels: Define the channels through which you will reach and engage with your target customers. Consider both digital and offline channels, such as websites, social media, partnerships, or direct sales.
• Customer Segments: Identify your target customer segments or specific market niches. State their needs, demographics, and behaviors. It's crucial to have a deep understanding of your customers to tailor your product and messaging accordingly.
• Cost Structure: Outline the key costs associated with developing, marketing, and delivering the product. Consider both fixed and variable costs to ensure a realistic view of your business's financial aspects.
• Revenue Streams: Define your revenue model and how you plan to monetize your product. Explore different pricing strategies, such as one-time purchases, subscriptions, or freemium models. Consider how you will generate sustainable revenue in the long term.

SWOT

SWOT stands for Strengths, Weaknesses, Opportunities, and Threats. It is an analysis technique used to assess the internal and external factors that can impact a product or organization. By conducting a SWOT analysis, you can gain valuable insights into the product’s current state and future potential.

To perform a SWOT analysis effectively, you should begin by examining the internal strengths and weaknesses of your product.

• Strengths (internal) are the unique qualities and advantages that set your product apart from competitors. These can include features, technology, brand reputation, or any other factor that gives our product an edge.
• Weaknesses (internal) are the areas that need improvement or pose challenges for our product. These can include limitations, outdated features, or any aspect that may hinder success. By identifying and analyzing these internal factors, we can capitalize on strengths and work towards mitigating weaknesses.
• Opportunities (external) are outside factors that have the potential to positively impact your product's growth and success. These can include emerging market trends, new technologies, or changes in consumer behavior that align with our product's value proposition. Identifying opportunities allows you to adapt your strategy to capitalize on them.
• Threats (external) are external factors that can hinder your product's success or pose risks. These may include competitive pressures, changes in regulations, or evolving customer preferences that could negatively affect your product. By recognizing threats, you can develop strategies to mitigate or overcome them.

Involve client stakeholders, our internal stakeholder ans SMEs, and (potential) customers. Their perspectives and insights can provide a more comprehensive understanding of the product's SWOT areas. Seek feedback and encourage open discussions to ensure all relevant information is considered.

The add-on to SWOT is analyzing the relationships between strengths and threats, and weaknesses and opportunities. You’re looking for a way you can leverage good factors to mitigate the risks of bad factors.

PESTLE

We’re going very macro on this one. PESTLE analysis will help you make sense of the business context surrounding your product. SWOT works on product level, while PESTLE goes to the bird eye’s view.

As in SWOT, each letter of this acronym stands for one area of the macro environment that might affect your product. Here’s a list of those areas you should research. Once you have the insights, you can tag them as favorable (+), neutral (0) and negative (-) for you product.

PESTLE can also inform the external factors of your SWOT analysis.

Elements of PESTLE analysis:

• Political Factors: Consider the political landscape and government policies that may affect your product or industry. Analyze factors such as regulations, trade policies, tax laws, government stability, and political ideologies. Understand how these factors can influence market entry, product distribution, or business operations.
• Economic Factors: Assess the economic factors that can impact your product's success. Evaluate elements such as economic growth, inflation rates, exchange rates, consumer spending power, and employment levels. Understand how economic trends and fluctuations can affect demand, pricing, and market opportunities.
• Social Factors: Examine the social and cultural aspects that shape customer behavior and preferences. Consider factors like demographics, lifestyle trends, consumer attitudes, social values, and cultural norms. Identify shifts in societal attitudes or emerging consumer needs that may present opportunities or challenges for your product.
• Technological Factors: Evaluate the technological advancements and innovations that impact your industry. Look at factors such as emerging technologies, automation, digitalization, infrastructure, intellectual property rights, and data security. Understand how technology can disrupt or enhance your product and industry.
• Legal Factors: Assess the legal and regulatory factors that affect your product or industry. Consider laws, regulations, compliance requirements, intellectual property rights, product safety standards, and labor laws. Understand how these factors can influence product development, marketing, distribution, or any legal constraints on your business.
• Environmental Factors: Examine the environmental factors that can impact your product and industry. Consider factors such as climate change, sustainability, natural resource availability, environmental regulations, and consumer demand for eco-friendly products. Understand how environmental trends and concerns can shape consumer preferences and business practices.

If this sounds more like a management consultant’s work than product strategist’s, you’re 100% right. Still, this framework should guide your desktop research efforts. Instead of googling around hoping to stumble upon something, you know know what to look for.

And regarding management consultants, use their content as a source. Big Four and MBB provide valuable resources for free that can help you speed up this process.

Porter's five forces

Porter's Five Forces analysis is a powerful framework that helps you assess the competitive forces within an industry. It provides a structured approach to understanding the dynamics and attractiveness of the market in which your product operates. Ideally, your product will be moving into an uncompetitive market.

Here’s a breakdown of competitive forces that might affect your product:

• Threat of New Entrants: Assess the barriers to entry for new competitors in your industry. Consider factors such as economies of scale, capital requirements, distribution channels, brand loyalty, and government regulations. Evaluate how easy or difficult it would be for new entrants to compete with your product.
• Bargaining Power of Suppliers: Evaluate the power and influence of suppliers in your industry. Consider factors such as the number of suppliers, uniqueness of their products or services, switching costs, and availability of substitutes. Analyze how suppliers can impact your business by exerting pressure on pricing, quality, or terms.
• Bargaining Power of Buyers: Assess the power and influence of your customers or buyers. Consider factors such as the number of buyers, concentration of buyers, price sensitivity, and availability of alternatives. Understand how buyers can impact your business by negotiating prices, demanding higher quality, or switching to competitors.
• Threat of Substitute Products or Services: Analyze the availability and attractiveness of substitute products or services that can fulfill the same customer needs. Consider factors such as price-performance trade-offs, customer loyalty, and switching costs. Evaluate how easily customers can switch to alternatives and the impact it would have on your product.
• Intensity of Competitive Rivalry: Assess the level of competition within your industry. Consider factors such as the number of competitors, market share distribution, industry growth rate, and product differentiation. Analyze how competitive rivalry affects pricing, innovation, marketing efforts, and customer acquisition.

Porter’s five forces are also one of the tools from business management consulting toolkit. They will broaden your horizon when thinking about the product and make your product claims more immersed in business than simple UX best practices.

You’ll understand who else is trying to make money doing the same or similar things as you do. Speaking the “business speak” is the way to have more sway with your client.