One of the best ways a startup can level-up their revenue is to create a new product. This strategy works because it allows founders to sell more products to their existing customers, which increases customer LTV (lifetime value), and can also attract new customers who may not be a fit for the original product.

But how to launch and monetize a new product without draining your resources or having a total flop?

Through three parts:

1. Strategy
2. Market analysis
3. Product-led growth

Today’s post will focus on part 1: strategy.

Where to start

There’s an important question when it comes to creating a new, revenue-generating product: what are we building?

You may think the answer is product development. But starting with product development doesn’t always lead to the right product, much less one that can be monetized.

There are a bunch of questions you need to answer before you decide what you’re building. Questions like:

• Why should this product exist?
• Where do we want the product to be in a year? Where do we want the company to be in a year?
• How does this fit into our strategic goals?

If these questions make you break out into an existential sweat, don’t worry. There’s a great way to work through product development strategy one question at a time.

At our “Getting to 3 Million in ARR” summit last year, heard from product legend Ketaki Rao. Ketaki has had an expansive career in product, working at big companies like Amazon and Salesforce, as well as at startups, most recently at data.ai, where she was Chief Product Officer.  She’s developed a funnel-like approach to new product development, which looks like this:

In other words, you can’t know what you’re building, or what features it needs, unless you know what your company is doing in the big picture.  

Now that you have the funnel, you can start to map all the questions to the correct segment. That looks something like this:

Okay, let’s see how this strategy works IRL

Rao was part of the team that made the very first Kindle way back in 2007.

Now, if you were building an e-reader in 2007, you might think that the best way to make money off a device was to, you know, sell that device. But by working through these strategy steps, the team had a big insight right when they hammered out the vision for Kindle:‍

In doing this, they unshackled themselves from the assumed revenue stream. If the product was making money during use, not just purchase, that meant the team needed to think beyond just the Kindle device.

That meant investing their time and energy in things like the Kindle app, which would provide Kindle Content on non-Kindle devices. (theme and roadmap)

That meant they had to make that content consistent and accessible, which included building out the operations to support it (theme and roadmap)

That meant they would find ways to help readers discover Kindle content. (theme and roadmap)

The strategic vision for Kindle dictated the product strategy, not the other way around.

It’s not too late to get aligned

If your product is already in development it’s not too late to do this exercise! It helps your team get on the same page and make the best possible decisions for your product.

Once everyone is in alignment you can really get to work.

Stay tuned for Part 2 of Monetizing Your Product: Market Analysis

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This article was written by Carolyn Abram, a freelance writer with a passion for technology. She also writes fiction and teaches writing classes in her home of Seattle. You can learn more about her at her website or on LinkedIn.