Inspiration

The Difference Between Product Inception and Growth

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Product builders chasing the elusive product-market fit move through two key stages in pursuit of long-term product success. The work they do on the path to product-market fit is a lot different than it is after they’ve achieved it. And the difference in the approaches they take to this work is critical.

These two stages that come before and after product-market fit are Inception and Growth, respectively:

Inception: Before finding the right fit, your product is not “profitable;” it does not have a solid basis for growth. The product is not providing enough user value, and the strategy is not on “target” yet. Scaling at this stage (i.e., invest in building lots of stuff) is bad money – it is waste.

Growth: On the other hand, once you know how to deliver value and present a strong strategy – i.e., you’ve found product-market fit – then you want to invest as much as you can in growth. This, Christensen describes as good money.

The Theory of Good Money and Bad Money

The late Clay Christensen – renowned Harvard professor and creator of the Jobs To Be Done framework, among others – presents another theory about what he refers to as good money and bad money. Christensen’s theory asserts that good money comes from funding sources that are “patient for growth but impatient for profit,” whereas bad money comes from sources that take the opposite approach.1

Christensen points out that 93% of all companies have to pivot to survive because their original plan does not work. While his theory discusses a company’s business model, individual products face similar challenges.

It’s important, therefore, during the Inception stage to find product-market fit as quickly as you can with as little investment as possible. It’s a fine balance, to be sure. Money invested chasing a mismatch between your target market and the challenges your product solves for, is bad money. Avoid investment in areas that will not work. Instead, embrace the opportunities that arise where the fit is more sound and where good money leads to Growth.

Thinking in this way about good money and bad money makes it important to realize whether you are in Inception or Growth. If your product is in the Inception stage and you approach product development as though you were in Growth, you’ll waste a lot of money building quality into features that you do not need.

In the same way, iterating quickly and over-experimenting with your product in the Growth stage will annoy your customers and lose the competitive advantage you’ve worked so hard to earn.
Inception is about discovering product-market fit – how the product delivers value to customers where there are enough of them to generate positive returns. Learning is the most important outcome during this stage – specifically, learning where value is generated, what customers want and will pay for, and whether there are enough customers to sustain the product.

Product Momentum Podcast guest Marty Cagan refers to this as understanding the product’s viability and feasibility. Therefore, development time focuses on rapid iterations prioritizing learning about which customers value your product and why.

Growth is about continuously improving the value that you deliver to your customers in a way that draws them in and retains them. During Growth, you need more stability. Quality becomes critical. You need to continue to iterate, but those iterations are focused on learning about how to better serve your chosen customers, delivering what they want at high quality and in ways that outperform your competitors.

Learning From Experience

I have worked with leaders at several start-ups who all said they knew what the market wanted. They specified the product features they wanted, and we built those features. The product’s success in the market was understandably underwhelming.

The problem, of course, was the market did not want those features. The client discovered this only later, after they brought the product to market and tried to sell it to their customers. It landed with a thud. Few customers actually paid for the product. The entire build was waste.

Had the start-up leadership team understood the product was in the Inception stage, they would have examined inexpensive ways to declare and test their hypotheses related to product value. And they would have learned. Instead, they built a complex solution to a question no user had posed. And they failed.

In Inception, Effectiveness supersedes Efficiency. To learn quickly, you need to rapidly iterate and consider each iteration as a potential throw-away. That feels like waste, but the goal is learning not creating a solid product. Therefore, cost and profit per unit are not consideration. Do things manually if you can, create temporary facades that look real but are not – iterate rapidly. Learn first; scale second.

Reid Hoffman, billionaire investor and founder of LinkedIn and other companies, offers this: “If you are not embarrassed by the first version of your product, you’ve launched too late.”

This is a perfect example of Inception thinking. The goal is not to build a great product; it is to learn about product-market fit.

Another example: a start-up we worked with wanted to go after the small business market that required a lot of self-service features they did not have. We jumped right in and started developing a proposal to build that out (Growth thinking).

Our approach was wrong-headed from the start – as we soon discovered when the client said they may need to change because the small business market isn’t willing to spend money (thank goodness we didn’t waste their money!).

Testing Assumptions

Instead, we should have challenged them to identify the assumptions that would allow us to move confidently forward with a solid strategy. Then, as inexpensively as possible, ask how we can test these assumptions.

So, for example, the conversation would sound something like this:Test: Create a simple form and an SEO campaign to learn whether prospective users will sign up to receive product information in the future.

Assumption: Customers are willing to sign up for this service online.

Test: Create a simple form and an SEO campaign to learn whether prospective users will sign up to receive product information in the future.

Test: Call a few dozen potential users and engage them in conversation to learn more about their needs.

Assumption: Customers are willing to pay for this service online.

Test: Again, create a simple form, and this time inviting them to provide payment information to test this assumption.

Assumption: Only customers from a certain demographic will sign up. Perhaps a small set of unique industries will consider the opportunity, with clients of a specific size would constitute a good fit.

Test: Focus groups, user surveys, and seminars could help determine this.

With a little creativity, astute product leaders can determine whether their hypotheses are valid, and do so inexpensively.

Some assumptions may require more creativity and energy; some less. Some might require impressing an investor or a large partner (the assumption that investors will invest), which suggests that building a mockup or working prototype might be required.

At Inception, the key is to spend the least amount of money necessary to prove/disprove the hypothesis. In some cases you may try something as simple as an unscientific survey. In others, you may need something more elaborate, like a mock-up or prototype. Money spent that is not required to prove/disprove your hypothesis is bad money.

If we can prove our hypotheses, we can confidently press forward with a Growth strategy, from which we can move into a more “traditional” build process.

The Inception approach is extremely iterative. It involves a series of experiments with actual users – defining all the areas and assumptions that need to be tested. Then test each one in small iterations, or cycles, each time learning more to determine whether you have achieved product-market fit.

Inception deliverablesinclude an experiment plan, complete with hypotheses and tests that disprove/prove each (or as many as we can). Further, the plan will receive regular updates and refinements following each experiment as we learn more. The power of the experiment lies in the learning we gather about what does and does not provide value to our customers.

Growth is also very iterative, but our objectives are different. In Growth, you deliver a functioning software product. The deliverable may be the next MVP in your roadmap, but it’s a high-quality, secure, well-architected solution that can scale as interest grows in your identified market. Learning draws its value from the incremental improvements that follow and from expanding/adjusting product-market fit based on competitors and so many other market dynamics. Understanding if you are in Inception still searching for product-market fit, or in Growth stage in full possession of it, is critical to how wisely you invest time and energy into building your product. Without this level of understanding, you will create lots of unnecessary waste.

[1] How Will You Measure Your Life?, by Clayton M. Christensen, James Allworth, and Karen Dillon, p. 87.  © 2012 HarperCollins Publishers, New York, NY.


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