Many modern software product teams believe agile development translates to constant improvement for customers, and as a result, resist formal roadmaps. But as products and categories mature, the game changes. Scaling startups face completely different market challenges than when they first entered their markets. Do they move into an adjacent category to get more share of wallet? Do they double-down in their existing space? Will partnerships or new verticals grow the company faster?
The answer often requires a more strategic approach driven by a deep understanding of markets and customer segments. It’s counter-intuitive but the amazing amount of product data now available often means teams rely too heavily on it, discovery experiments, or demands from sales to shape decisions and miss the market-based, top-down approach that can be so powerful.
Microsoft recently surpassed Apple to become the U.S.’s most valuable company, but not so long ago, Microsoft was experiencing challenges similar to what many scaling startups face: how do they maintain their existing businesses while simultaneously moving toward what’s newer and growing? The engine behind much of Microsoft’s success is their disciplined, market-driven approach to product strategy.
I experienced it myself years ago when I was a product manager for Microsoft Word. A strategic mandate came down from the executive team that our next version had to support the newest release of Windows. This meant doing it in less than half our normal development time. It forced us to rethink all our assumptions and prioritize only by what would move the market.
By the time we finished, although it was the least number of features we’d ever put in a major release, it became the best reviewed and most successful version of Word up to that point in time. Internally, some of us dubbed the approach the “donut hole” method, and I’ve found myself suggesting it to a number of scaling startups to help reframe how they’re thinking about future products and how to stay competitive.
Here are the basic principles:
1) Grow the donut hole: focus on core functionality that most users touch every day
Seventy-five percent of all actions inside of Word fell into a few basic categories: things like printing, formatting, and file management. It was basic stuff that felt “done” to most of us. We noticed features like bullets weren’t discovered by many, but for those who did find them, they were used often. So, we started inserting bullets when we knew that was what users were trying to do with a dash or an asterisk. The red squiggly line for a misspelled word that’s now a standard for mistakes in any app? All that started in this release when we realized we needed to use features on behalf of users for things they used every day.
We made sure most of the enhancements we built were in this daily-use core so customers could experience improvements. So much of “better” is perception. The more users experience your enhancements, the more value they believe they have.
2) Grow bite by bite: group enhancements by customer segments
Sometimes it takes a certain amount of critical mass in a functional area for users to really feel like a product is worth using. For example, the legal market needed bulleting to perform highly specific tasks for legal briefs. Without an improved drawing and layout engine, we simply couldn’t do more sophisticated layouts our advanced users wanted.
So, in addition to enhancements in the donut hole, we’d take on one market segment at a time, grouping a certain number of features to make sure we were meaningful for that particular audience. This was very counterintuitive for us at the time, as the prevailing approach had been to make improvements everywhere, across all areas. But this more focused approach helped us decide what to prioritize in our time-pressured version, which allowed us to save more features for a later date when we had more time. We took each market a bite at a time – and it worked much better for us and customers.
In today’s agile world, I often hear about the challenges market-facing teams experience with enhancements not having enough visibility or critical mass to be noticed by customers. Identify key market segments and group how you release and market enhancements segment by segment.
3) Distribute the load: across the product portfolio and releases
Figuring out what was “in” versus “out” was always a battle. However, this is where strategy coordination came in and this is something I believe Microsoft does better than any other technology company out there. They set a course across product groups from the top down. In this release, we had a mandate to support the new OS and the upcoming release of Exchange. This made it easier for product and market teams to make decisions around when was the “right” time from a market perspective to release an enhancement.
The top-down strategy was always driven by what was most important to Microsoft as a business at large. They never hesitated to play for the long term at the expense of short-term wins (a luxury of a healthy business, of course). But they also always ensured their entire product portfolio lined up against any strategically important market.
When I hear about scaling startups being in the throes of highly competitive markets, feeling pricing pressure, needing to hit sales numbers and meet seemingly unrealistic growth expectations, I always look first to product strategy. The donut hole method can bring a more market-centric focus that ensures product improvements move the needle for the business. The best part: It’s great for customers. And we all know, happy customers help products sell themselves. What could be better?
