The ultimate guide to product discovery

Some truly unique products are on the market, from automated plant watering devices to rideable luggage. Sometimes, we stumble across something so innovative that we can't help but wonder how a company came up with the idea.

While inventors still have eureka moments, today's companies use well-established processes to develop and test new ideas.

Most large corporations have departments devoted to new product development (NPD). And some companies work solely to develop and test new product ideas and prototypes for other firms.

Product discovery is at the heart of NPD—a multistep process that helps companies develop some of the most popular products. 

While product discovery requires planning, effort, and resources, businesses of all sizes can use it to help them identify and create the Next Big Thing™. 

Using this process effectively starts with understanding what product discovery is, how to implement it in a business, and how to address challenges that may arise. Let’s get into it.

It's easy to come up with ideas. We have many techniques for idea generation, from round-robin brainstorming to mind mapping. 

However, businesses need ideas for products that they can produce, distribute, market, and sell to customers effectively. And not every idea fits this criteria. A product idea might be too expensive to manufacture or distribute. It may not solve a problem customers need to solve. 

Businesses rely on product discovery for viable business ideas, mitigating the financial and marketing risks of developing and launching unsuccessful products. 

Fundamentally, product discovery is a framework for businesses to generate and refine ideas that solve real user problems. It helps product teams work on what’s viable for a business to produce, distribute, and sell while addressing what existing and prospective customers need. 

Product discovery keeps teams focused and can increase the odds of identifying products that resonate with customers and are profitable after launch.

Launching a new product is always risky. Customer preferences shift, sometimes rapidly. Technology evolves by the minute, making products obsolete. 

Macroeconomic and regional economic prices can depress sales. Competitors may introduce substitutes or knockoffs. And internal errors in production, distribution, or branding may undermine sales efforts.

Every business faces risks with products already on the market. But additional risks come with launching new products. Product management expert Marty Cagan has categorized these risks as follows:

Business viability risk

Business viability risk is where new products don't conform to existing business operations. Companies need ideas that comply with existing laws, regulations, and internal rules. 

Products must align with existing sales and marketing channels, contracts with existing partners, and brand expectations. They must be profitable and help the business meet its financial goals. 

If businesses don’t mitigate these risks, they may waste a lot of time and money on NPD efforts that never get off the ground. Or they may launch products that fail because they don’t align with the rest of the business.

Feasibility risk

Another big risk for companies is whether the new product is viable within current operations. 

A new product team could develop an idea that would likely resonate with customers. However, it might consume existing manufacturing resources and hurt the business's ability to meet existing customer demand. 

Product teams must ascertain whether their business has the production capacity to produce the product, no matter how good the product idea seems.

Usability risk

Sometimes, what seems like a simple solution to product teams is not as intuitive as they think. There are many well-documented cases of products that failed to take off because users couldn't figure out how to use them. 

Just a handful of customers posting reviews stating that a new product is difficult to use can sink a product. Many product managers spend substantial time testing products with prospective users to mitigate this specific risk.

Value risk

No matter how much businesses spend on advertising and marketing, there's a chance that customers may not see the value in the product. 

Products in new markets are especially vulnerable to this risk. Businesses may spend substantial amounts to educate the public about the product category before a product launch. 

Businesses sometimes even struggle to communicate the value of products in well-established categories. General economic issues, high competition, and brand misalignment can contribute to value risk.

Product discovery draws from traditional design thinking, Agile and lean software development, Jobs to be Done, and other product and operational methodologies. 

Marty Cagan has taken credit for coining the term "product discovery" in his 2007 book, Inspired, though he notes its essential principles came earlier. 

Since the early 2000s, several influential business experts, such as Teresa Torres, Eric Ries, and Clayton Christensen, have written notable books that elaborate on and refine product discovery concepts and tools.

Continuous discovery (or continuous product discovery)

In her book Continuous Discovery Habits, Teresa Torres coined the phrase "continuous discovery." It refers to continually performing product research to identify potential improvements and insights that may lead to new products. 

Product discovery typically refers to the initial work that leads to a new product. Torres and other experts note that companies should engage in ongoing discovery efforts to create a feedback-discovery loop that yields better products over time.

We can find product discovery in some of the world's most well-known companies, such as Amazon, Google, and Facebook. It makes sense that the tech sector uses product discovery as it partially draws from the Agile software development model.

However, companies in industries from consumer packaged goods to industrial equipment routinely leverage product discovery principles and tools.

Effective product discovery requires considerable cross-departmental collaboration. Product teams can only develop ideas by understanding production capabilities, branding, marketing research, or financial goals. 

They also can’t take ideas further without understanding regulatory and legal boundaries, prior contractual obligations, or the executives’ short- and long-term business vision.

Effective product discovery requires a team with members from the design, engineering, marketing, and product departments. 

Representatives from finance, sales, and legal should also be involved at some stages in the process. Product team leads can bring in representatives from these groups as needed throughout the product discovery process.

Before embarking on an initial product discovery journey, assembling stakeholders is critical. It's also important to consider the dynamics of the group you’re forming. 

The product team will need to be able to collaborate and communicate effectively with each other, so it's wise to consider who’s involved and what they’re doing. It's crucial to establish group conduct norms and standards to mitigate the risk of conflicts derailing the process.

Working with templates can also keep the team on topic and save time and money.

Once you’ve assembled the group and conveyed expectations, a product manager will guide the team through these steps:

Understanding user needs

The first step requires product discovery teams to familiarize themselves with the users' worlds. 

Teams should start with existing qualitative and quantitative customer data from customer relationship management and other enterprise systems. Publicly available data, such as social media comments and press coverage, can also be helpful. 

Teams should also pore through any market research on hand, like focus group videos and customer interviews. This can provide a greater understanding of what their customers need and want.

Defining user needs

As product discovery teams gain a better understanding of their customers, they must begin to identify and define pain points. 

Ideally, existing research has helped them identify at least one problem that they can summarize in a single sentence. A clear, brief explanation of a problem makes it easier for your product team to focus on a solution. 

Product teams often uncover multiple pain points. At this stage, it's important to focus on which problem is most important for the user to solve. 

The problem should be significant enough that customers are willing to pay for a solution. It should also impact a large enough segment of those customers for a solution to generate significant revenue.

Product teams may uncover multiple problems that require different solutions, each of which could result in a viable and profitable product. Multiple product prioritization frameworks can determine which product idea should be pursued, such as:

Buy-a-feature

This exercise can include product teams or customers. The coordinator assigns monetary values to different ideas and features and gives the group a hypothetical amount to spend. 

Analyzing what group members spent their money on can help a company understand which ideas or features customers may find most valuable.

Cost of delay

Product teams evaluate the effect of time on the costs and revenue of a potential product or feature. Teams assign a monetary value to the revenue a product or feature might be worth if introduced immediately, down the road, or already a part of the product. 

Comparing these values for each idea can help teams determine the most viable.

Kano model

Product teams create an X-Y axis with the following parameters: 

• On the horizontal axis: How likely the idea meets a customer's needs

• On the vertical axis: The level of customer satisfaction

This method can help teams determine if product features or modifications are worth pursuing by homing in on the ideas in the upper right-hand quadrant.

The MoSCoW method

This approach helps teams prioritize which features should be in a product by categorizing them as must-haves, should-haves, could-haves, or won't-haves.

The product tree

Product teams use a whiteboard to draw a tree trunk representing an existing product and branches representing potential features in future iterations. From there, customers add sticky notes with ideas on them. These represent the leaves.

Opportunity scoring

With opportunity scoring, product teams create an X-Y axis, where the horizontal axis is importance, and the vertical axis is satisfaction. They chart product idea data from a customer survey about potential features.

RICE (reach, impact, confidence, effort)

With RICE, you rank potential product ideas according to a score obtained by the formula: 

Reach x impact x confidence / effort

Teams should proceed with the ideas with the highest RICE scores first.

Story mapping

Here, teams map out every element of the customer journey. This helps them conceptualize how customers may receive the product and how to market, price, and distribute it. Story mapping can also help teams weed out problematic product ideas.

Value vs. effort

Product teams weigh the idea's value to the company, benefit to customers, and impact on business goals against the idea's cost, effort, risk, and complexity. You should prioritize the ideas with the highest ratio.

Identifying the ideal solution

Once you’ve identified the right problem, the team must work on the optimal solution. This stage starts with ideation techniques like mind mapping, storyboarding, and design sprints. 

Teams will use these tools and techniques to identify and develop ideas to solve the problem they've prioritized. Multiple ideas typically come out of these sessions. 

However, the product team must evaluate each by considering how well they solve the problem, their feasibility, and their alignment with the business goals and brand.

If a product team isn’t focused, they can spend a lot of time on this stage. It's advisable to establish finite periods for each aspect of this phase and to reinforce the parameters for the product idea. 

Otherwise, product teams could spend excessive time brainstorming or focusing too much on a single potential feature, resulting in unproductive effort and delays in new product development. 

Prototyping

With a concept in mind, product teams must develop a prototype. At first glance, this additional step may seem to add unnecessary delays and expenses to the process. 

However, prototyping serves multiple purposes. Building a physical model of the product enables product teams to better evaluate the viability of the product idea. 

They can more easily identify design errors, note potential production cost drivers, and explore how intuitive a product is. These insights can help them optimize the design to make the product as valuable to the user as possible.

There are several different types of prototypes. The most basic is the sketch, which is as simple as drawing an image of the product idea. It can be a very rudimentary outline or a detailed diagram. 

Even a 2D rendering can help product teams identify areas for improvement. 3D printing technologies allow product teams to quickly create prototypes from sketches. 

These models can provide product teams with invaluable design and production insights. However, 3D printers aren't necessary to build a prototype. You can build physical models from any material that represents the final product accurately. 

Software development often uses wireframes—quick sketches of a product's general look and set of features. These can help designers and developers visualize and build the final product.

Testing

With a prototype in hand, product teams should conduct prototype tests to obtain early feedback from potential customers. Prototype testing can help product teams answer questions like:

• Does this product solve the problem?

• Does the product work as intended?

• Is it intuitive to use? If not, what makes it difficult to use?

• How valuable do prospective customers find this product? What would improve it?

• What excites them about the product? What disappoints them?

• What do customers think about the product's design, like the graphics, colors, and logos?

In short, prototype testing helps product teams validate concepts, test usability, and gather user feedback about how the product makes them feel. 

These insights have tremendous value to the production, marketing, and sales departments as they design, produce, and plan the product. This feedback also helps product teams develop appropriate strategies to manage the product throughout its lifecycle.

Prototype testing is typically not limited to market research involving a single prototype. Rather, product teams usually start by testing simple prototypes. Based on feedback, they develop increasingly complex prototypes until they have a working model. This final, functional prototype serves as the basis for production models.

Product discovery is a complex process that requires multiple elements, such as:

• Product teams with appropriate representation from key internal stakeholder groups

• Good group dynamics that encourage collaboration, creativity, and data-driven decisions

• Leadership supports and buys into the process and products that emerge

• Prioritizing products that align with the company’s vision and customer needs

• Commitment to continuous testing of assumptions and iterative development

• Deep customer listening and immersion in their needs and journeys

• Appropriate allocation of human and financial resources

• Established deadlines for each phase of the product discovery process

Without these fundamentals, product teams and businesses are far more vulnerable to the common risks associated with new product development. 

When product discovery initiatives fail due to the absence of these elements, product teams can struggle to elicit the cross-departmental buy-in necessary for future efforts to be effective.

However, when these elements are in place, businesses can save time and money. They can avoid many of the most common headaches associated with the process while minimizing the risks associated with new products. 

Additionally, businesses can create innovative products that align with their brand and goals. And they can ensure the products have the best chance of success in the market.

Using the product discovery framework helps businesses develop more innovative products. They resonate with customers faster and are less expensive than traditional product development approaches. 

It also helps businesses ensure that new products align with their existing operations and brand.

Typically, product discovery refers to the initial discovery to develop entirely new products. 

Continuous product discovery refers to product teams continually gathering customer feedback, integrating it into existing products, and using it to develop new products.

Businesses initiating a product discovery process should assemble a core product team with representation from their product, design, engineering, and marketing departments. Input from other departments is also essential, such as sales, 

However, the core team must drive the product discovery process through each stage and bring in other internal stakeholders as needed.

The first step in product discovery involves the team learning all they can about their existing and prospective customers' needs and pain points. They do this by examining existing data from internal sources and public datasets. 

Sometimes, they may commission new qualitative or quantitative market research to understand their customers better.

Some product discovery and related market research applications have some hefty upfront costs. Given that product discovery involves people, you can assign a dollar value to the labor hours attributed to this process. 

But despite the upfront investment of time and money, the ROI on product discovery can be tremendous. When businesses create products that resonate with customers, they can enjoy increased revenue, market share, and profits.