Building Software Products At Startups

This section of the class is a hands on exercise to help you iterate on a product you already enjoy using or one that you'd love to create from scratch. You'll learn about:

• The Business Model Canvas
• Building customer empathy
• Understanding your value proposition
• Setting a vision and communicating it
• Testing your assumptions

Jesse is a Partner at IA Ventures, which focuses on seed-stage investments. He breaks down what he looks for in a product, startup, and founding team.

Product managers are business owners. You need to define the business value your product will create. Don't waste time on documentation and specs. Instead, quickly write down your assumptions and then go talk to customers to validate what your plan is.

The Facebook business model is simple. Entertain people with great content, collect massive amounts of data on them, entice advertisers with the opportunity to create highly targeted ads, and charge the advertisers for those ads. This business model has turned Facebook into a ~$250bn company.

Throughout the class, I'll walk through the same exercises that you're doing with the example being the company I founded, Arkad. The business failed, but I hope the live example gives you an opportunity to see the exercises I'm asking you to do applied to another product.

To build empathy, you must leave the office and speak to your customers. Find any way possible to locate potential customers. Buy them coffee, interrupt them when they're walking down the street, visit them at their office - do anything you can to interview and get to know them.

Mark was the Head of UX and Design at Shutterstock for five years. He shares a ton of wisdom about designing for a great user experience.

I've also included a link to one of the best product management books, Inspired, by Marty Kagan.

Think about why your customer is going to hire your product. What job/goal are they trying to achieve with your product. How did they get this job done in the past? Your competition is the method that they were able to achieve their goal in the past. If you're creating a pizza ordering application, your customers are hiring you to get them pizza at home. They achieved this by calling their local pizza restaurant, placing an order, and waiting for the delivery person to arrive at their front door. Or they may have baked a DiGiorno. Before delivery was an option, your customers may have picked up the pizza on their own or created the pizza from scratch.

People are hiring Facebook for entertainment, to know what their friends are up to. People have always found platforms to be social and share ideas. In the 1600s, the social network was the new coffee houses that were popping up all around London. You can read about that here - http://www.nytimes.com/2013/06/23/opinion/sunday/social-networking-in-the-1600s.html

The jobs we were trying to help people do at Arkad were making it easier to collect and share information. Before this, companies were used to sharing presentations and excel files with their investors. The collection of the data was very cumbersome and difficult for an investor to reconcile across the portfolio.

I highly recommend you take a look at the book connected to this class. It's a very simple step-by-step guide on different strategies for creating valuable products.

I decided to deviate from the Arkad example to explain my understanding of the value proposition of this class to one of the customer segments I'm targeting with this class - I call this segment the "Career Changer." Sorry about the lighting on this lecture, but hopefully you find it valuable!

Once you spend the time to breakdown your customer profiles, rank the importance of their jobs, pains, and gains. As you're designing your product, make sure you're solving for the most important in each category, so you can deliver a valuable experience to your customers.

Amazon uses a great tool for setting a vision for every new product they create. Before any work is done, the product manager and team write a press release as if it were the day before the delivery of the product. If they cannot articulate the value and vision for the product succinctly and get the team excited about what they're going to deliver, no work is started.

Each press release has the following components:

• Heading – Name the product in a way your target customer would understand
• Sub-Heading – One sentence describing the market and benefits of the product
• Summary – Give a summary of the product and benefit
• Problem – Describe the problem your product solves
• Solution – How do you elegantly solve that problem
• Customer Quote – Pretend a customer is telling you their favorite part of the app

This press release represents approximately three months of work for the NewsCred analytics team that we're hoping to accomplish in the Fall of 2015.

A well designed product has a unique voice and stands for something. This should be at the core of every product decision and every feature the team implements.

Checkout the book linked in the external resources. Design is a clear competitive advantage in product today. I really enjoyed the author's perspective on building software products with a focus on design-centric processes and strategies.

The MVP is the smallest iteration required to test the hypotheses you've made. Every time you implement new features or build a new product, you must identify your riskiest assumptions and find ways to test if you can overcome them. Your most precious resource is time; don't waste it on something that you could have de-risked.

Spotify has a fantastic graphic (included in the class resources) that describes the difference between iteratively building a great product and not doing so.

Every version of your product must teach you something and deliver value to your customers. You shouldn't develop features in a vacuum, and your customer's definitely won't use something that delivers no value.

I believe that you should be using the MVP model no matter how big or successful your product becomes. We try to apply MVPs at every iteration at NewsCred, so we don't invest heavily in something that our clients don't actually want.

Matt Doumar was the VP of Innovation at SinglePlatform. SinglePlatform did an incredible job de-risking it's hairiest assumptions early on, and were quickly rewarded for that with a stellar growth trajectory and a $100 million acquisition.

As your building new products and features, you should take the time to do things in an unscalable way. Recently, we were testing a product idea at NewsCred in which our clients would get a list of people who were reading their articles. There was a hypothesis that our clients wanted to see defined segments of people based on interests. So, instead of engineering that, we downloaded the data and created Excel files that broke down the customer segments for them. We then presented this to our clients and asked them whether or not they found it valuable. We cannot keep doing this for all of our clients, but it was a good, quick test that we could do by hand once to find out if we our hypotheses were correct.

My startup, Arkad, failed because we took too long to test our riskiest assumption. We should have spent our time early on testing the business model with unscalable tactics, like manual labor, rather than spending 6 months building software. Six months building software while living in NYC is an expensive endeavor that we could have avoided with better tests upfront.

You can hook your users with habit loops.

• Trigger - Employ external triggers, like emails and notifications. But you need to rely on an internal trigger, which should ideally be something that people feel or remember on their own, without your prompting.
• Action - Make it as easy as possible for your customers to take an action that leads them to a reward for acting on your trigger.
  
• Reward - Your reward should be variable, i.e. the customer should not know what the reward will be until they see it. For example, Facebook doesn't tell you which photo your friend liked in its email. You have to log in to see the photo.
  
• Investment - Prompt the user to make another investment in the product, so they're encouraged to come back through the habit loop again.
  

I'm definitely addicted to checking Instagram. Here's how their product takes advantage of a habit forming loop.

• Trigger - I have a #FOMO (fear of missing out) on seeing what my friends are up to, and I receive app notifications on my phone.
• Action - I open the app and scroll through my feed.
  
• Reward - I see my friends' newest photos quickly, and I find out how many people have liked my photos or commented on them.
  
• Investment - Social pressure encourages me to like my friends photos, and show everyone what I'm up to by taking a photo through the convenient photo button, which is displayed at the bottom of the app at all times.
  

Although we never made it this far, I thought I'd enumerate what our habit loop might have looked like if I were to start the same business again.

You can steal customers by being better at the habit loop than your competition:

• Faster actions - Make it easier to take the actions required.
• Better rewards - Give something better for investing their time with your product than your competition does.
  
• Higher frequency triggers - make the triggers happen more frequently (psychological or external). Toothpaste only became popular in the US in the 1900s when an advertiser took advantage of a common habit (licking one's teeth) and turned it into a trigger to brush teeth. Also, the unnecessary tingling feeling made people crave the reward of that feeling of success.
  

It's not an easy job, but that's what makes it amazing. The key to being successful is great communication.

At NewsCred, we recently increased the transparency into our product prioritization process. We used an auction process (detailed in blog posts below) that brought in the wisdom of our entire company into making great business decisions. The transparency helps us communicate exactly what's happening and get the buy-in of the entire team.

Objectives and key results (OKRs) help you and the team define success for each product iteration. You should set goals and test to see if your objectives were achieved with your key results.

Work with your team to set goals. Short duration goals help encourage people to get work done faster and create real value for customers. It's important that the team comes up with the goals together, so they buy into them. People are more likely to achieve things when they create the benchmarks of success.

Agile development prioritizes learning, iteration, and customer feedback over processes and planning.

Scrum is a way to organize an agile team. It's not that important to learn, but you can quickly pickup the resource book attached to this class to get to know it better.

Brian Schmitz is the Director of Engineering at NewsCred. He has been working in the software industry since the late 90s. He has a great perspective on how teams organize for success.

Mark Sherrill discusses some great techniques for building customer empathy on a team of engineers and designers as well as communicating the goals of your customers across your organization.

User stories are a way to communicate the customer value being delivered by the team. Every user story should effectively communicate the work you're doing to both your customers and your technology team. Ideally, the stories are written by the team collectively, but the product manager typically owns the backlog of stories.

There are many ways to write user stories. I'm starting to gravitate toward the Jobs to be done stories detailed in the blog posts below, but the most common user story format is:

As a {User Persona}, I want {to do something}, so I can {achieve a goal}

I hope you enjoyed the class. Becoming a product manager was the best career move I've had the opportunity to gain. I continue to learn every day.

Most importantly, if you want to be a PM, take on a project, own the delivery of it, and try to turn it into a product people will buy. That's what this class was for me. I wanted to see if I could pull together a class for a group of students who might be interested in learning more about product management.

If there's one technical skill that I think makes PMs stand above their peers, it's the ability to analyze data and illuminate decisions where others were only guessing. Try out a statistics class online. That's how I learned to build statistical models that helped me demonstrate my ability to ask the right questions, find the answers, and communicate them to the team.

I encourage you to continue learning and thinking about new products to bring to the world.