How do you know when to invest in a second product and become a multi-product company vs innovating on your existing product?

Question

Puja Hait · Accepted Answer

I would consider the following factors:

* What are the goals at that time? How best are the goals served? e.g need a product-2 to monetize and sustain product-1, which is growing but no line of sight to monetization 
 * Competitive value - What is the best way to build or defend moat? Is the sum going to be greater than parts? Vertical or horizontal integration? Solution offering rather than piecemeal feature offering?
 * Execution confidence- Are we in the position to take on a second product? Can we deliver, maintain and do justice to both?

Hiral Shah · Answer

Phenomenal question, I recently gave a full talk on this topic.

I think about going multi-product as a way to transform your company for the long run and to expand companies life cycle.

Every company has a cycle of life - Companies are in startup mode, growth phase, and peak before start declining. Hence, best time to innovate is during the upward trajectory in the growth phase. Read more about it in this article: https://www.gsb.stanford.edu/insights/mark-leslie-key-enduring-growth-strategic-transformation

Ashka Vakil · Answer

The decision to invest in a second product versus innovating on an existing product depends on a variety of factors, including market demand, core competencies, competitive landscape, resource allocation, strategic goals, and financial viability. By carefully considering these factors, a company can make an informed decision that aligns with its overall vision and mission.

* Market demand: Is there a clear need and demand for a second product? Are there opportunities to address new market segments or expand into new geographies?

* Core competencies: Does the company have the core competencies and resources necessary to develop and launch a second product? Does the company have the necessary talent, technology, and infrastructure to support multiple products?

* Competitive landscape: What is the competitive landscape like for the existing product and potential second product? Are there established competitors that will make it difficult to launch a second product, or is there a clear opportunity to gain market share?

* Resource allocation: Can the company allocate the necessary resources to develop and launch a second product without detracting from the existing product? Are there opportunities to leverage existing resources, such as technology or talent, for the second product?

* Strategic goals: How does a second product align with the company's overall strategic goals? Will a second product help the company achieve its long-term vision and mission?

* Financial viability: Can the company afford to invest in a second product, and what is the potential return on investment? Are there other revenue streams or financing options that can support a second product?

Brandon Green · Answer

I don't think I have a great answer for this; I think there are a few possible points to consider though, and I think it ultimately comes down to how you understand the user/market problem your company is positioned to solve with its product(s).

1. Is that problem best solved by a single product, or does a group of products better address the problem or need? If so, how and why?
 2. Is your product not serving the needs of your customers, and if not, why? Does the product have meaningful shortcomings affecting product-market fit, or is the market changing? (The latter was something we experienced directly at Abstract and caused us to explore a new product offering.)
 3. What are other companies in the space shipping, and what does it say about their framing of the problem they're trying to solve?
 4. Does your company feel you've delivered a mature, successful product to solve that main problem and you are eager to grow into a new market, solving a new and different problem?

I hope this is a little bit helpful!

Laura Oppenheimer · Answer

Great question that goes beyond product strategy and into larger company strategy. Every product serves a given user job or jobs. When you have product market fit and things are going well, you then have a choice:

1. Continue investing in serving the original job to gain a larger piece of the total addressable market for that job or:
 2. Think about a new product offering that could either serve your existing customer in new ways or create a new adjacent customer segement to your original one.

I don't believe there's a hard and fast rule here, but speaking with users can help shed light on whether your current product is "good enough" or if it still needs work. With every product, your users or customers will have feedback, and the question you need to answer as a PM is "Is addressing this feedback going to drive more adoption or usage, or is it a nice to have?"

Frameworks like the RICE framework developed out of Intercom (or even an Impact/Effort 2x2 matrix) can help answer this question. From there, you can ID if the feedback you're hearing is feedback that will unlock growth in your current product... and if you don't think it will, you can look to build something new.

Ravneet Uberoi · Answer

This can be tricky! It will depend on a triangulation across a number of factors including:

1. The room to grow in your existing product (both in terms of TAM, the competitive dynamics and your current position in the market) -- this will help determine how much headroom you have to innovate on the existing product vs launch new ones. If you have some obvious "low hanging fruit" on the existing product it's usually a sign that there's more work to be done there before launching into new product lines (unless the competitive dynamics push you to do so).

2. The market demand: Most often the demand for a second product will come as a pull from the market vs a push from the company. Look for signs that your buyers are asking for a naturally adjacent solution or expressing a related unmet need that your sales team can't fulfill today. Look for signs that your users expect / are seeking an extension of your capabilities possibly by hacking together a solution themselves, using developers, or seeking solutions through asks to customer support. Look for signs that competitors are bundling a new offering or building partnerships in an adjacent space. These are tell tale signals that the unmet need is larger than you anticipated and the company needs to expand into a new product or service line.

3. The vision of the company and founders (and related funding): Product expansions are usually only possible if these align with the vision of the founding team. What is the business that they set out to build? How has that vision adapted over time? What do your investors expect you to build (a product, a service, a platform, a ...)? This is the less organic, less talked-about, side of product development that does impact how and when a company decides to innovate.

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