What are you Building Next ? : Part II - Nexus
Part II : Nexus of Innovation: Crafting Enduring Product Value
If you haven’t read “What are you Building Next: Part I”. Please read here before you continue as the article is tightly coupled with Part I.
Quick Recap of Part I: In the previous section, we explored how no product ever reaches a "permanent" state of Product-Market Fit (PMF). It requires constant effort to retain sustainability. One of the key strategies to maintain this is by reducing customer churn, focusing on the factors that prevent customers from leaving. Now, let's dive into Part II.
What's Next?
In Part I, we covered one of the three ways to avoid Product Market Saturation and ensure sustainable, growing PMF. What’s the next step? The answer is quite intuitive.
Imagine you visit a restaurant and love the food. What do you do next time? You return—maybe to try different dishes. If you enjoy those dishes too, you start to associate a higher value with that restaurant. The restaurant, in turn, builds its brand in your eyes. Now imagine the restaurant opens a new location with a different cuisine. You're likely to give it a try as well. If that experience is also positive, your perception of the brand strengthens even more. Soon, you're dining at both locations because you’ve come to trust the quality of both cuisines.
This leads us to the second key strategy for sustaining and growing PMF: “Do More Business with Existing Customers.” Let’s explore how this approach works and why it’s crucial with the example chosen for this Article Series: Meta.
Lesson II: Do More Business with Existing Customers
Concept I: Leveraging PMF to Introduce V.A.M.F (Value-Added Monetizable Features)
Example I:
Facebook was launched in 2004 and had around 20 million daily active users (DAU) by 2007. That same year, Facebook introduced its first revenue-generating feature: Facebook Ads. This allowed businesses to advertise directly to users, recommended by Facebook based on user profiles. Over time, Facebook rolled out additional monetization features, such as Facebook Social Ads, Facebook Pages (where businesses could pay to create profiles and increase visibility), and Facebook Games, which included ad interruptions during online games.
In 2018, Facebook launched Facebook Subscription (initially called "Fan Subscription"), enabling content creators to offer exclusive content to subscribers. In return, Facebook took a percentage of the revenue earned by these creators. This monetization strategy allowed Facebook to further capitalize on its user base by providing additional value to both businesses and users.
What did Facebook do?
Facebook established a solid DAU and strong user base before introducing monetization features. By adding value for both businesses (advertisers) and users (through relevant ads and features like subscriptions), Facebook was able to expand its business.
Example II:
A similar strategy was employed with WhatsApp, which was acquired by Facebook. After WhatsApp gained a large user base, Facebook introduced WhatsApp Business and WhatsApp Business API, monetizing through a conversation-based pricing model. Conversations are categorized into four types: marketing, utility, authentication, and service, with different rates charged depending on the region.
Key Takeaway from Both Examples:
Both Facebook and WhatsApp introduced monetization features after proving their product’s value and achieving PMF. This doesn’t mean you should always wait to introduce monetization, but it does highlight the importance of first proving your product concept. Once the core concept is validated, introducing additional features that provide real value to users can lead to revenue growth. These features can be positioned as upsells, add-ons, or bundled into premium offerings, as seen with products like Apple TV, music, and news bundles. This strategy allows companies to "Do More Business with Existing Customers" while sustaining and growing their PMF.
Concept II: Build and Expand Your Product and its Ecosystem
You've successfully "fixed the leaky bucket" by reducing churn building a loyal customer base and improving retention. You've also developed features that your customers are willing to pay for. So, what's the next step? If you're at this stage, you and your product are in an excellent position. There are multiple paths to take from here, and different perspectives to consider.
Product Perspective:
Sometimes, your product will naturally evolve to solve new problems or address existing problems with greater depth, potentially justifying the creation of a standalone product. A great example of this is Facebook Messenger. Initially launched as Facebook Chat in 2008, it was a simple web-based messaging app. By 2011, as mobile technology advanced, Messenger was adapted to mobile platforms. Over time, features such as voice calling were added, and by 2014, Meta decided to spin it off into a standalone app. In 2015, they introduced video calling, followed by a range of other features like location sharing, a bot platform, instant games, AR effects, and Messenger Rooms. Messenger's in-app purchases and entertainment features generated significant revenue—about $1.93 million in 2023. The takeaway? Sometimes, a subset of your product can grow into a standalone solution with its own value.
Disclaimer: Your next product idea doesn’t have to be a subset of your first product's problem; it could be an entirely new problem your customer base faces—one that your expertise is well-positioned to solve.
Technology Perspective:
Advances in technology often signal the next big problem worth solving, but you need to be attentive. We've discussed Meta’s first product, Facebook, which connected users to friends, communities, and updates. As you solve one problem for your customers, new issues may arise due to evolving needs or technological advancements. By closely watching trends, you'll identify opportunities.
Group I: Short-Term Perceptual Awareness: Crafting for Consumer Intent Today
During the mobile-first computing era, the demand for visually appealing, interactive social media experiences led to the creation of Instagram. Initially, Instagram went through several pivots before its 2010 launch. It catered to a younger, more creative audience seeking new social experiences. Similarly, TikTok and Snapchat capitalized on the mobile-first digital age. Meta recognized this trend and acquired Instagram in 2012, exemplifying the importance of adapting to evolving technology and customer preferences that shifted with technology.
Group II: Long-Term Perceptual Awareness: Building for Consumer Intent Tomorrow
Recognizing long-term technological trends and understanding inflection points is key to long-term success. Nvidia, for instance, positioned itself as a leader in the GPU space for AI applications. Meta, again, serves as a great example of this approach. In 2020, Meta launched Reality Labs (part of the New Platforms and Infrastructure product division), focusing on advanced technologies like AR and VR. Over the years, they've introduced products like Ray-Ban Meta Glasses, Quest 3S, and the recently announced Meta Orion, which is an advanced, futuristic wearable device designed to overcome many of the limitations of current mixed-reality headsets.
Meta Reality Lab’s products seamlessly integrate with their existing ecosystem of apps, such as Instagram and WhatsApp, while also connecting to external systems like Windows 11. These innovations allow users to perform tasks such as locating parking spots or conversing in real-time with someone who speaks a different language, thanks to the integration of Meta AI’s LLaMA 3.2. Meta’s long-term vision began with their 2014 acquisition of Oculus, laying the foundation for their current leadership in AR/VR. This demonstrates the value of having long-term perceptual awareness of technology trends and being ready to adapt.
Side Note: If you're interested in learning more about building long-term perceptual awareness, identifying trends, and breaking patterns, I highly recommend reading Pattern Breakers by Mike Maples Jr. and Peter Ziebelman.
Key Takeaway: Building and expanding your product ecosystem involves recognizing when subsets of your existing product or new problems within your customer base can evolve into standalone products. Additionally, staying ahead of technological advancements and customer trends can guide you in developing solutions that sustain and grow your PMF. From the product perspective, the goal is to find ways to multiply customer value and increase business with them. From the technology perspective, it’s about developing a keen sense of how the technological landscape, demographics, and customer expectations are evolving, and offering timely solutions that align with those shifts.
Final Thoughts
Albert Einstein once said, “Strive not to be a success, but rather to be of value." Always remember, your role is to continuously deliver value. Your customers are the cornerstone of your growth, and you will grow in proportion to the incremental value you create for them. That's why doing more business with your existing customers is a key second step in sustaining Product-Market Fit (PMF). It provides an opportunity to create additional value for those who already believe in your product.
If you're ever uncertain about what to do next after developing a product that your customers love, talk to them. Ask them what problems they’d like to see solved more deeply. If you serve different customer segments, ask what features or solutions would add even more value to their experience. And don't forget to introspect. Consider what you know today and what you foresee for tomorrow—what problems are worth solving for the people who already cherish your product and wish for it to do even more?
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Nice Article Dheen, Keep going