In our work with product teams, from investment-looking startups to corporate teams, we help manage focus and priorities in early product development. This spans from initial product strategy to identifying the ideal customer, achieving Product-Market fit, and seeking growth.

Initially, getting the team’s priorities right is always a struggle. Teams are focused on hands-on product and customer acquisition work. They “move fast and break things,” but such a frenzy can become a grinder and leave teams with little capacity to stand back, visualize, strategize, and execute a clear plan.

In our experience, teams must maintain three key focuses during these early phases. We use three related artifacts to coordinate and share work:

• Overall Product Strategy with the Platform Strategy Model;
• Iterative Validation with the Validation Table;
• Growth and Go-To-Market motion with the Growth Model.

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Product design and management

It may sound obvious, but early-stage teams often lack a clear product strategy and how it creates core value and allows for customer personalization. Any digital product you build today is—by no choice—a “platform” product.

All products are immersed in networks or relationships and exist in complex ecosystems where customers use product combinations to attain jobs that a single product can’t offer. This is what Scott Brinker calls “joint customer needs.”

Considering three essential elements of a Digital Product value proposition is important.

 

The Core Product-Service Bundle

Each digital product must define the core value proposition and the core product-service bundle for the core customer (and potentially for ancillary ones). In the vertical SaaS space, the core product is often a tool that can be used to achieve critical parts of the customer workflow. Designers must understand the customer context, workflow steps, key data sources, decision-making process, and renewal cycles, as well as whether your product caters to part of the workflow or the whole.

A good example is Shopify’s core product bundle:

• Website Builder
• Payment processing
• Inventory and order management
• Marketing tools (email, SEO, etc.)
• Logistics

An early-stage product will focus on a smaller core of services, rather than having such a depth of services.

 

 

The derivatives: Marketplace and Extensions

Each digital product must extend the core bundle’s value proposition across two major derivatives—to cater to niche and extended customer needs.

The first option to complement the core bundle is to build a marketplace to connect our core customers with another ecosystem stakeholder. Connecting users with their customers (for demand generation) has enormous potential: the perceived value is huge, and a product could take a cut from a transaction if managed “on the platform.” The demand generation marketplace is sometimes the core feature (see Airbnb) or just a complement (OpenTable).

The second derivative is the one we call an “extension” or “integration” platform strategy. This strategy involves creating ways, such as API programs or developer portals, for third-party software vendors to connect with your product to extend its functionalities. This is usually a later feature, not a priority for an early-stage product, because software attracts third parties to create “extensions” if it’s an industry standard or has good penetration. On the other hand, a small number of integrations can help in the earlier stages to ensure your customers they’ll have the possibility to use your product along with some key industry standard software. Casey Winters has great thinking on the topic.

Not all digital products can extend across a marketplace or extensions. For those where this makes sense, these product development directions are crucial as they provide two benefits. First, they allow the creation of defensibilities through network effects—a differentiator that is important given the ease of developing SaaS nowadays (and the competition). On the other hand, extensions allow a customer to implement niche use cases (increasing fidelity) and integrate natively into existing products in the customer context.

For example, Shopify features both a marketplace (Shopify experts) and two extension strategies (templates and Shopify apps).

 

We explained these three value propositions in an earlier article.

 

The Platform Strategy Model is an artifact introduced in October 2022 to provide an easy and synthetic overview for teams to synthesize a digital product strategy according to these pillars. Here’s an example of how we’d represent Shopify’s:

 

 

 

It goes without saying that most of the teams we work with develop a deeper understanding of the product design beyond a synthetic PSM with other tools. Our Platform Design Toolkit provides a step-by-step process for capturing ecosystem needs, designing optimized experiences, planning on Go-To-Market approaches, and achieving growth. On the other hand, we advise teams to have a handy PSM in mind because these three elements are well captured: the core product-service bundle, the marketplace, and the “extension” strategy. Three key things for modern digital products.

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Validation

It is essential for teams to understand what they’re building by designing a synthetic product strategy and vision upfront. However, it shouldn’t be the objective of an early-stage team to sit on a theoretical design or get stuck in the original vision.

That’s why another essential focus, activity, and artifact is related to research and validation. Validation has been codified in the startup context, starting from customer development or lean startup and with more specific tools like experiment boards.

 

We take a synthetic and pragmatic approach and encourage teams to:

• identify what are the key hypotheses to test and assess their confidence level based on how much evidence collected before;
• Classify hypotheses along three major validation categories: desirability (based on the appeal of the Value Proposition itself), feasibility (technical), and viability (related to the business model, unit economics).
• Define their relation to the PSM (core service, marketplace potential, and necessity of integrations and extensions).
• prioritize those hypotheses based on their impact on the product, with riskier ones higher. A hypothesis focused on the core product and customer is generally riskier than one on ancillary elements.
• identify testing avenues, including interviews, prototypes, and MVPs.

 

Of course, the hard part of validation is not just prioritizing but also achieving a high-tempo practice of running experiments, along with the capability of doing experimentation properly: interviewing without biasing, observing customer interactions with the product, creating prototypes, etc.

 

Here’s a validation board example for a fake early-stage Shopify team validating an early product release. This is just a clarification tool and doesn’t necessarily mirror Shopify’s early validation processes.

 

 

 

 

 

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Growth and GTM

Finally, the third pillar of an early-stage startup strategy and core work focus should be GTM and Growth. Typically, the focus on growth arrives later, after the product shows some product-market fit (or product-customer fit). Ideally, the product is already growing organically, and we need to accelerate growth to reinvest into further product development.

Historically, building a growth model has been complex, causing many early-stage startups to fail until later. A growth model is a mathematical representation of how a product acquires and retains users and generates revenue. It typically includes key metrics like customer acquisition cost (CAC), lifetime value (LTV), churn rate, and conversion rates. Building a comprehensive growth model for early-stage startups can be challenging due to limited data. However, a simplified version can provide valuable insights and guide decision-making. The key is to start with basic assumptions and refine the model as more data becomes available.

We guide early-stage teams in finding their Growth Model through a Canvas and a Template. Our Growth Model Canvas allows teams to frame and investigate essential questions. First, it lets the team think in terms of Customer Acquisition Channels and figure out the CAC. How much does it cost to acquire a customer through a channel? This is a question every product team needs to answer.

It also allows you to look into using cheaper customer acquisition strategies like virality and User-Generated Content (UGC), which are increasingly important in the context of digital product development given the astronomical cost of traditional channels like paid acquisition.

Building the growth model with the Growth Model Canvas helps teams identify key user behaviors and how to positively impact converting an acquired customer into a “paying” or transacting one. The growth model prompts you to answer questions such as: What are the percentages of free users that register to use the freemium product version (or engage in a marketplace) that convert into paying users? Working on a growth model often consists of experiments that directly impact conversion rates.

The growth model also nudges the user to understand how the presence of users on the platform creates self-reinforcing loops. Cross-side network effects can sometimes benefit the product features. Imagine building a Vertical ERP SaaS and connecting it with existing third-party Software your customer uses daily. Imagine building a marketplace whose value depends on the number of suppliers available for a customer. In some cases – even if such “network” features don’t impact the intrinsic product value – there are essential attraction effects, where onboarding another subscriber can bring in other customers through referrals, word of mouth, or a bandwagon effect (“if everybody uses it, I should too”).

One can harmonize this information to draft a math-based set of projections to understand the expected system growth and how to reinvest money from acquired customers into further acquisition strategies using the updated Canvas and Spreadsheet templates we released to the public in June in an updated version. A well-set – even if not perfect – growth model can be a powerful asset for investment plans and communicating with investors.

A team should consider the “Product-Channel fit” when considering growth channels. Since early-stage product distribution follows a “power law,” understanding the key acquisition channel will save money and effort.

The growth model is based on assumptions and hypotheses that need rigorous testing. Running a growth model involves pushing more product evolution and customer acquisition hypotheses into the high-tempo validation practice to validate growth strategies. When it comes to growth-related validation, one should focus especially on the “growth limiting assumptions” which could severely vet the company’s growth expectations

The hypotheses for growth testing come from two types. The first cluster will be about testing new acquisition strategies—maybe a new channel. The second cluster will be about testing different conversion strategies, like testing how a new freemium model or a new pricing tier can convert more customers into paying ones.

 

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Conclusions

Early-stage startups must consider three essential things: a clear product strategy, the ability to perform high-tempo validation testing, and an unfolding growth strategy collapsed into a clear growth model.

To do so, Boundaryless provides three essential tools:

• the Platform Strategy Model for the overall product strategy representation (download from here.)
• the Validation Table template for listing all the prioritized hypotheses for testing (download from here)
• and the Growth Model Canvas and Template to represent how you acquire customers, convert them, and invest your money flows into further customer acquisition (download both from here)

 

If you’re an early-stage startup or a corporate team doing product innovation and need help reframing your strategy and priorities, reach out to the boundaryless team via the form below.