The Importance of Validation in Product Development: A Strategic Approach

When you’re developing a product, it’s natural to assume that the features you’re adding will deliver value to your customers and your business. But how do you truly know that these features are providing the expected value? Recently, I’ve been working with a client facing a common issue—sales-driven features are fragmenting their product, making it harder to use. This issue stems from prioritizing short-term gains over long-term value. In this blog post, we’ll explore the pitfalls of this approach and how shifting focus towards value-driven development can lead to more sustainable success.

The Danger of Sales-Driven Features

Short-Term Gains, Long-Term Losses

One of the most significant challenges in product development is the pressure to close deals. Sales teams are often driven by the need to hit targets, which can lead to the inclusion of features that have little to do with the product’s overall vision or the needs of the end-users. While closing a deal is important, doing so at the expense of the product’s integrity can have long-term negative consequences.

• Fragmentation of the Product: Adding features solely to close a deal can make the product more complex and harder to use.

• Hidden Costs: A feature might help close a $30,000 deal, but if it costs $100,000 in support, maintenance, and lost future sales, was it worth it?

The Sales Incentive Problem

Sales teams are usually incentivized based on the deals they close. They might receive a bonus for securing a $30,000 deal, regardless of whether the feature they sold adds long-term value. This creates a misalignment between what’s good for the product and what’s good for the salesperson.

Example: Microsoft Azure’s Approach

Microsoft faced a similar challenge with Azure. Originally, sales bonuses were tied to the number of Azure hours sold, leading to situations where customers bought large amounts of capacity but didn’t use it, resulting in dissatisfaction. Microsoft shifted its approach by tying bonuses to the actual usage of Azure hours by customers, encouraging salespeople to focus on customer value rather than just closing deals.

Shifting Focus: From Revenue Extraction to Value Creation

The Hypothesis-Driven Approach

To ensure that your product is delivering real value, it’s crucial to adopt a hypothesis-driven approach. This method involves creating a hypothesis about the value a feature will add before it’s implemented, and then testing that hypothesis once the feature is live.

What is Hypothesis-Driven Engineering?

Hypothesis-driven engineering involves making educated guesses about the impact of a feature and then validating those guesses with data. For example:

• Hypothesis: Adding a passwordless login option will increase user sign-ups.

• Validation: After implementing the feature, track how many users choose the passwordless option and whether overall sign-ups increase.

By continually testing and validating these hypotheses, you ensure that every feature added to the product contributes to its overall value.

Measuring Success

To measure the success of a hypothesis, it’s essential to have the right telemetry in place. This means setting up your product to collect data on how features are used, allowing you to make informed decisions.

• Data Collection: Track how users interact with new features.

• Usage Analysis: Determine if the feature is being used as expected and if it’s contributing to the overall goals of the product.

The Importance of Telemetry

Telemetry is the lifeblood of hypothesis-driven development. Without it, you’re flying blind. You need to monitor how features are used, gather data on their impact, and adjust your approach based on that data. This allows you to make evidence-based decisions and ensures that you’re investing in features that truly add value.

Avoiding the Pitfalls: A Case Study

The Chaos Report

According to data from the Chaos Report, only 35% of features in software products are actually used by customers. This means that for every million dollars invested in product development, $650,000 is wasted on features that don’t add value.

• Why is this happening? Features are often added without sufficient validation of their value.

• What can be done? By adopting a hypothesis-driven approach and validating features before full-scale implementation, you can reduce waste and increase the value delivered to customers.

Practical Steps to Implementing Hypothesis-Driven Development

1. Define the Hypothesis

Before implementing any feature, clearly define what you expect it to achieve. For example, “If we add a Facebook login option, we expect a 10% increase in new user sign-ups.”

2. Set Up Telemetry

Ensure that you have the right tools in place to track the feature’s usage. This might involve setting up analytics to monitor user behavior, tracking how many users engage with the new feature, and analyzing whether it’s driving the desired outcome.

3. Validate the Hypothesis

Once the feature is live, compare the actual data against your hypothesis. Did you achieve the expected increase in sign-ups? Are users engaging with the feature as anticipated?

4. Make Data-Driven Decisions

Based on the data, decide whether to:

• Double Down: Continue investing in the feature if it’s driving value.

• Pivot: Adjust the feature to better meet user needs.

• Stop Investing: If the feature isn’t adding value, consider removing it or stopping further development.

The Role of Product Managers and Owners

Accountability and Decision-Making

Product managers and owners play a crucial role in this process. They are responsible for ensuring that features align with the product’s vision and deliver value to users. This involves making tough decisions about which features to invest in and which to discard.

• Ask the Right Questions: How many customers are using the feature? Is it worth the investment? What’s the total cost of ownership?

• Use Data to Back Decisions: With telemetry in place, product managers can make informed decisions about the future of features, ensuring that the product evolves in a way that maximizes value.

Conclusion

In today’s fast-paced product development environment, it’s easy to fall into the trap of adding features to close deals without considering their long-term impact. However, by adopting a hypothesis-driven approach, collecting the right data, and making informed decisions based on that data, you can ensure that your product remains focused on delivering real value to your customers.

Key Takeaways

• Avoid Sales-Driven Features: Focus on long-term value rather than short-term gains.

• Implement Hypothesis-Driven Development: Define, track, and validate the impact of new features.

• Use Telemetry to Make Informed Decisions: Collect data to ensure features are adding value.

• Empower Product Managers: Give them the tools and data they need to make evidence-based decisions.

🚀 By following these principles, you can create products that not only close deals but also deliver sustained value to your customers and your business.