How to Find the Product by Tom Coates

Making stuff is awesome. Developing new product ideas with smart people is genuinely rewarding. And while the outcome of putting a finished product into the world is fun, technologist Tom Coates says the experience of making things can be even more enjoyable. In his closing keynote from #mtpcon San Francisco, Tom takes us through where ideas come from, where they don’t come from, and gives insight into a process that can help all of us to discover new products.

Everyone is Capable

Tom has been designing and building product for almost 25 years, and takes great joy in finding a broken part of the world, understanding it, and building something that can fix it. These days, however, most people who enter the tech industry never truly get to experience this process of finding ideas from scratch. Most of us come into the industry and work for someone else, using our skills to bring someone else’s idea to life.

Those of us who enter the industry to build someone else’s idea tend to be familiar with techniques to make things happen and get product to market. We are good at the cycle of “Build, Measure, Learn”, but we don’t really understand where the idea came from that gets fed into that cycle. We think coming up with ideas is something that other people do, and that founders have a lightbulb moment where the idea appears out of thin air.

Tom Coates on stage at mtpcon sf
Tom says he has met a lot of people over the years who are waiting for the big idea to strike. He he has known creative, brilliant, and inspiring people who can make extraordinary things, who somehow think they are not capable of creating ideas. He’s also met many people who have had an idea in their head for years, but never really put it to the test to see if it makes sense. The truth is, everyone is capable of finding new ideas, and there are techniques and processes that can help.

What is an Idea?

This may sound like a very basic question, but there are misconceptions about what an idea is. We may think that ideas appear and remain static through a product’s lifecycle, but ideas evolve, get refined, and change. The place where you start is not where you end. So when Tom talks about ideas, he is simply looking for a clear description of where you want to start building the first version.

The goal is to bring focus to your idea, and get enough information for you to have something to test. Tom recommends you make initial assumptions around areas such as:

  • The basic promise of the product
  • A set of features that will fulfill that basic promise
  • The people who will use the product
  • How you might monetize it

You’re not trying to get to product-market fit at this point. It is an attempt to guess what it might be in a relatively structured way so you can start work.

The Context in Which Ideas are Formed

We regularly talk about product sitting in the center of business, technology, and user experience. While it is a helpful model to think about our roles in companies, Tom also thinks it is a valuable way to think about new ideas. With UX we understand user needs. In tech, we examine feasibility and possibility. In business, we look at financial possibilities and what people might pay for. If your idea doesn’t have all three areas, it is not an idea at all. It is an illusion.

Any of these areas might be the initial spark of a new idea, and no product team can deliver unless all three disciplines are involved. So make sure you are looking across disciplines and sanity checking each idea to see if it is viable.

Tom Coates speaking at mtpcon sf

How do Ideas Appear?

The foundational story of Silicon Valley is the magical founder who turns up one day with a fully formed idea. We’re led to believe that the “Eureka!” moment is everything, and everything that comes after is just the unfolding of that story. This isn’t really how it happens. Ideas are not divine inspiration. Ideas are work.

There are a few different ways that ideas can come to fruition:

  • The Slow Hunch: ideas that appear to come from nowhere, but have really been stewing for years. The person has been thinking about the area for a long time, turning it over in their head, maybe even experimenting a bit, until finally things come together. But it seems to have been an immediate revelation.
  • Building on the Work of Others: Facebook wasn’t the first social network. There were several others that came before it. Facebook was the first that was able to really find the business model and become successful, but it was able to build on the conceptual labor that had already been done by others.
  • Discovering an Idea Through Work on Another: This is the pivot. For example, Flickr was born out of a web-based game that had media sharing. The game never gained traction, but the media sharing proved to be valuable, and Flickr was born.
  • The Hidden Work in Survivor Bias: After a company succeeds, it is really easy to forget about the hard work that went into the beginning and hard to see the work that went into other areas of the startup system.

So ideas are hard work, but this is a good thing! It means that ideas are not only the domain of geniuses and demi-gods. Any of us can put in the work to develop ideas.

Tom Coates show an idea process at mtpcon sf

A Process for Finding Ideas

Now that we understand that we are all capable of finding ideas, how do we go about putting in the work to do so? Tom walks us through some steps he has found useful in discovering ideas.

  1. Start off by finding some territories – a core user need, business opportunity, or technology that seems exciting. Don’t start with a fully-formed idea. This can be accomplished by starting with a wall and some sticky notes, and writing out everything that is interesting to you at the moment in the world of tech.
  2. Explain what is interesting about these territories to others. This will help you articulate why an area is interesting, and what you might dig into further.
  3. Group the insights coming out of explanations into themes.
  4. Generate some very quick product ideas in territories that you are considering focusing on. This should be short – 20 minutes – but just enough time to rapidly assess if there is a territory with some value.
  5. Vote on the territories you find the most interesting.
  6. Write them into simple, clear, one-pagers and rank them.

This is a focused process that should only take a couple days at most, and provides you with some areas to explore.

From Territory to Idea

Tom Coates tells how to evaluate an idea at mtpcon sf
Once you have chosen a territory to focus on, you can dig deeper to find ideas.

  1. Commit to the territories you have chosen and explore. Spend a few weeks digging into them – play with the technology, interview users, and really understand your starting point.
  2. Focus in on user needs. No product idea is communicable to another human being unless it brings value to real people.
  3. Don’t be afraid to apply brute force. You can try to force concepts together to see if they make sense.
  4. Gradually start to triangulate your idea. Start to figure out how to move your idea from its starting point to the center of the three disciplines.
  5. Filter as you go. Trust your instincts and park things that don’t make sense.
  6. Fill in the detail by going out into the world. Meet the users, talk to the people who will pay for the service, and continue to refine based on what you learn.

Choose an Idea

Now that you have gone from an infinite product space to a few product ideas, it is time to choose which one you move forward. Run your ideas past real people, trust your team, and check your own enthusiasm. But most importantly, remember it is just the beginning. You’re about to embark on a journey of exploration, so choose the area that will open the most doors and provide the greatest amount of opportunity. Look for the project that makes things possible that weren’t before. Then make a decision, and commit.

Tom Coates speaks at mtpcon sf
The truth is, this is always the beginning of a larger process. However far you get, you still have more to learn. We never stop finding the product – and that’s okay! Our work evolves, pushes, and changes the state of the art. It has been a hard time in the world of tech recently, but Tom still believes in the future that we can create. As long as we are working ethically, and as long as we’re aware of the effect of the things we make, if we find ways to make everyone’s lives better, we are doing good. So let’s spin up our ideas by the thousands, and take them out into the world. Let’s be great. Let’s be good. And let’s have fun!

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New Product Development: an Introduction to Gate Systems

New product development is a risky business for companies – the failure rate for product launches hovers around 40%. A quick look at Product Hunt demonstrates there is a flourishing market for new products, all of them competing for our time and money. Companies that have previously found success with one product must invest in the next generation or risk it becoming irrelevant. However, minimizing the investment risk associated with those new products is the key to long-term survival.

Gate systems have long been a way to control that risk, and have been implemented successfully in many industries ranging from pharmaceuticals to software to manufacturing.

What is a Gate System?

A gate system, also called stage-gate or phase-gate system, is a series of steps in which a new product needs to meet certain criteria with the aim to attract additional investment to further development. Each step minimizes the risk involved in launching the product to the broader market through extensive customer testing and culling of poor performers, leaving only the strongest candidates.

Why use a Gate System?

Fundamentally, gate systems serve to minimize the risk and cost associated with new product development. All companies have limited resources for investigating new products, so they must focus those limited resources on the most promising ideas. According to research by Stevens and Burley, the industry average funnels 3,000 ideas down to just one commercially-viable product, while industries such as pharma run as high as 8,000 ideas leading to a single approved product. The purpose of the gate system is to apply a strict framework to systematically identify the losers and then divert the resources to the winners.

By setting out clear criteria for the intended business goals for the product in the early stages of product development, companies can more efficiently use their limited resources to test a variety of ideas and select the winning ones.

Good gate criteria mean that early-stage products are not judged by the same criteria as later-stage products, and that early-stage products are allowed the space to develop. One of the major killers of early-stage products is measuring them by financial metrics that are more appropriate for later-stage products. Early-stage products benefit more from metrics systems that are more closely tied to the small groups of customers on which they are testing; for example, Google’s HEART framework.

Conversely, when a gate system is not used and there are no clear criteria for furthering investment in products, decisions to stop or continue depend more on luck and/or the political skill of the team. From a management perspective, this is not ideal as it means promising ideas can be killed and poor ideas can be brought to market. For the business, this handing over of new product development responsibility to Lady Luck is perhaps not the best long-term business strategy.

Considerations When Determining Gate Criteria

There are several elements that influence the success of the gate system, and selecting clear, enforceable criteria is one of the pillars of this success. Gate criteria should reflect the long-term strategy of the company and be internally consistent from one stage to the next.  Since gate systems are typically built from the idea stage through to large-scale commercialization, criteria should be relatively stable year on year to allow for concentrated product development efforts.

In addressing the question “How do I determine gate criteria?” I will defer to the common response from product management, which is: “It depends.” Gate criteria vary widely from company to company, but with this in mind, I can give some perspective on the requirements that influenced the criteria we used at Telenor.

I used to be head of product at Telenor, Norway’s state-owned telecommunications company, which also has a big portion of its operations in Asia. Telenor’s gate criteria have to be relevant in Scandinavia, home to some of the world’s most advanced telecoms markets, and also relevant to emerging markets like Bangladesh and Myanmar.  The following table gives an idea of the elements we looked for at the various stages for both the business-to-business and business-to-consumer product criteria:

Stage Partial list of sample gateway criteria
Entering Stars
  • Strategic area of interest (determined by senior leadership)
  • Large addressable market (e.g. more than x million people)
Stars to Bottle Rocket
  • Clearly identified target users
  • Large number of target users in market
  • Pain for target users is significant (users are actively trying to work around the issue with existing, non-ideal solutions)
Bottle Rocket to Satellites
  • Well-defined problem statement for target users
  • Technical feasibility of scalable solution
  • Security, privacy, and legal considerations addressed
  • Large market opportunity
Satellite to Space Shuttle
  • Clearly-defined business model
  • Clear market plan for reaching target users at scale
  • Technical scaling plan that addresses rapid expansion
Space Shuttle to Space Station
  • Saturation of target user group
  • Clear plan for operational efficiencies

Some of these criteria were localized so that a business unit could continue working on a product that was relevant for its particular area, but did not necessarily have an appeal outside of that market. For example, a large market for Norway could be 500,000 (10% of the population), but for Pakistan would be five million (roughly 2.5% of the population).

Criteria drive the entire gate-system process. It’s important to take the necessary time to consider the implications of the selected criteria and to ensure that they remain aligned with company strategy.

What Happens Within a Step?

Within each step, the team works towards meeting the criteria for the next gate. This typically requires repeated hypotheses testing to gain an understanding of which assumptions are valid.  The hypotheses differ depending on how far along the product is in the process – early hypotheses are typically tested on a few dozen people in a face-to-face environment, whereas later technical hypotheses may be tested on thousands of users to determine whether a system is truly scalable. By building up the data from these tests, the teams are then able to prove (or disprove!) the viability of a product in a particular market.

Production work within a step is conducted by a cross-functional team relevant to the stage. For example, in the early stages, it is unlikely you would have a dedicated marketing resource as part of the team since there is nothing to market. However, it may be useful to have “experts” available to the team to provide advice on particular aspects ( for example, legal.) As the team progresses through the gates, additional resources are added. For example, an ad hoc security resource at the beginning of product development becomes a full time security resource once the product scales.

In order to ensure that progress is being made and the team has the resources it needs, there should be regular reviews to assess the team’s progress. These interim reviews can be used to make minor adjustments to team composition, such as increasing contribution from a part-time resource or providing access to an expert not readily available. Interim meetings between the gateway reviews are also the place where products will be killed. Once a product is killed, the team will need to ensure that the information from the product’s life cycle is recorded for so that future teams can access it.

Caveats to Running a Gate System

Gate systems only work when they are supported and adhered to by senior management.  If senior management doesn’t adhere to its own criteria or keeps pulling resources away for pet projects, the system will fall apart rapidly. It takes discipline at the highest level to ensure that the products coming through have the support they need for proper development. If the criteria are causing problems, senior management should take the time to sit down and reassess what is a more reasonable approach for resource allocation.

Gate criteria should be clear enough so that someone who is not directly involved with the process can understand why a decision was made to continue or discontinue a product. A management or product team left mystified as to why a product was ended can lead to frustration and lack of morale within the organization. When a product is ended, it’s  important that the team officially organizes and records the learnings for future teams. The team should have enough time to organize the files so that they can be easily accessed by the next product team working in the same area.

Because of the way the gate system works in allocating resources, some teams may work on product after product which never see a public launch. These team members should not be penalized for this as they are contributing to the general knowledge base of the company that may well lead to other successes down the line. Senior management needs to keep this in mind and make sure that the teams can rotate onto later-stage products to allow all a chance to work on something externally-facing.

Final Thoughts

The gate system can be used to manage the downsides of early-stage products and bring new products to market reliably, without risk to the long-term viability of a company.  Investing in the requirements for a gate system can serve as a foundation for a product portfolio strategy as you will be able to more easily manage various products in various stages of development.  Each team will understand where they are in the overall system when looking at the different gate criteria for the next stage of product development, and senior management can better understand where their resources are going and at what point they can expect a payoff.

Having said that, gate systems may be too much process for a small company with a limited portfolio of products. The intention of gate systems was based on resource allocation in large companies with sizeable product portfolios where scalable systems were needed to drive the work of large groups of people.  In general, don’t create additional process if it doesn’t give commensurate benefits.

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