Choosing the Right Market for AR & VR Products

Whether you’re a solo developer or you have a host of analysts at your disposal, finding product-to-market fit has always been a balance of art and science for both enterprises and startups.

In this 3-part series we'll explore concrete steps for reducing the guess work of choosing markets for XR products, creating offerings that are truly unique from competition and choosing the right XR moves to invest in even if your consumers aren't all wearing headsets.

An Overview of Product-to-Market Fit for AR/VR/MR

As the adoption of immersive tech continues to increase, especially in Enterprise, we have an opportunity to create life-changing extended reality (AR/VR/MR = XR) products. That is, as long as it’s the right Applications for the right people at the right time. Easier said than done, especially when XR solutions, headset adoption, and customer expectations seem to be a moving target.

In my consulting practice, I’ve found that no single strategic methodology works for solving every product problem. A toolkit of strategy exercises, frameworks, and models is where the magic happens — some of these are as traditional as Alex Sloan himself, while others are nearly brand new.

For many years now, we’ve heard from thought leaders on all the buzzword-y approaches like:

• Lean Startup
• Design Thinking
• Jobs-To-Be-Done
• Agile
• Design Sprints
• Blue Ocean Strategy
• The Advantage Framework
• The Vision-Traction-Organizer
• Service Design Blueprint
• Etc.

While many of these have had their moment in the spotlight, most pro consultants will tell you they’ve created their own toolkit inspired by many of these popular approaches to design products that people love. For immersive tech like VR, AR and MR there will be nuances, but many pieces of the process of designing products that people buy and use are technology agnostic.

I’ll share the process that I and others are finding helpful in recent projects and I’d love to hear from you as well. My process has been going something like this:

1) Find the Tribe

Find the group of people you’re serving who have unmet needs around certain jobs. These people may be current customers of solutions like yours, or they may be on the sidelines getting the job done in other ways. Most product teams either take a nervous guess about their tribes or drown themselves in existing data trying to make a decision. Neither needs to be true.

2) Create a Match Hypothesis

This defines the unique reason your tribe will fall in love with your product, and the bomb you’re dropping on anyone that you consider competition.

3) Test Love-Ability

Create 1-week prototypes to test ideas, evaluate UX and eventually test the full offering in an MVP that leads to version 1.0 in the market.

With the right team, you can go through these steps in 3 months. First, a few definitions.

“Product-market fit means being in a good market with a product that can satisfy that market.” - Marc Andreessen

Defining Product-to-Market Fit

For our exercise here, we’ll say Product-to-Market fit is achieved when the business proves traction between it’s product and a widespread group of customers who are willing to use and/or pay for it. It's when you’ve validated your hypotheses and assumptions and you can scale with confidence.

How many of you have teams that are really good at the top of this pyramid? Maybe you’ve even started at the top and tried to work your way down? In the design community, we often have too many great ideas without knowing which ones are going to resonate most.

Defining XR Products

When I refer to XR products I really mean focusing on what I consider our new “Productive Reality” with XR. Using XR, not just passively, but to help us complete tasks in life and work. For example, using XR for hands-on training, visual instruction, shopping, transactions, design, demonstrations, data visualization or communication to name a few. Of course, much of this can be applied to storytelling as well.

Defining Success and Love-ability

One of the biggest mistakes companies make is thinking they have product-to-market fit when they don’t. When you don’t, an entrepreneur will feel it in their gut but it often comes in the form of unclosed deals, mediocre reviews, or usage feeling slower than you expected. If word-of-mouth isn’t spreading relatively quickly, you’re not there yet.

Finding Real Unmet Needs

Understand customers and their needs, once and for all

Remember this product? It went through some wonderful design sprints and usability testing… but it was in the wrong market from the beginning.

XR may be a new solution, but for any problem that you’re solving for, the needs for that job have existed for a very long time. Perhaps hundreds of years. We’ve always needed solutions for getting and maintaining our physical energy, for example.

Many solutions have been developed, including some new VR-driven ones, but the task itself is what I “hire” these solutions to do. The task can be broken down into discrete and predictable parts that don’t change over time, making them a stable unit of analysis.

Remember when we all made a tons of apps for smartphones, hoping that the device could solve all of the world’s problems? Over time, we’ve learned what a smartphone is good at and what it’s not. While the smartphone was a new solution, every app on your phone is designed to meet the fundamental, emotional and financial requirements of an old task in a new way.

Think about the apps you use most often — for me it’s Evernote, Mint, Spotify, LifeSum, Circuit Timer, Slack, Podcasts, Reminders, and Dashlane. All of these can be mapped back to basic needs that have had many alternative solutions over time.

As a product entrepreneur, your goal is to get several related jobs done well on a single platform. Spotify not only helps me listen to music — it helps me find new music — something that none of these solutions have done in the past.

So how do you go about choosing markets? We can start by picking the jobs.

Defining the Tasks, Problems and Needs Per Job

Conduct qualitative interviews to define the functional, emotional and social tasks, problems and customer needs around getting the job done. 

By breaking down a job into its discrete parts we can identify the customer needs — then figure out which of those needs is unmet. Through a series of interviews with people who need to do the job, you can discover and define needs at each stage that are consistent over time. For example:

"When I am in meetings with remote participants, minimize the time it takes for us to share what we’re seeing with each other.” 

By creating clear needs statements like this you can validate whether or not they’re true problems and you can clearly design solutions to them. Better yet, you can ask the market how satisfied they are with their ability to do this today and how important it is to them.

Remember that massive list of ideas that you have in the backlog? Through your interviews you’ll likely find 100-200 problems per job — now you know which problems are the most unmet for your customers — making your backlog priorities much easier.

If you have the budget for a large market survey, you can conduct some deeper analysis to help you understand segments of unmet needs. As you can imagine, there’s no general consensus from the entire market as to which needs are unmet — everyone seems to have different needs. With the right research partner you can find pockets of customers who are underserved, over served, and served appropriately.

The result can look something like this example from Tony Ulwick’s team at Strategyn. They have put a lot of science behind the jobs-to-be-done theory. He goes into exhaustive detail on the methodology in this talk as well as his books.

Each one of those dots represents one of those need statements that you created - and the shapes represent different segments of the market. These segments all have things in common — they could be anything from working conditions to lifestyle. In this example, the red dots are clearly over served and the job is not terribly important to them. The grey triangles on the other hand feel that most of the needs of this job are extremely important and many of their needs are underserved.

3 Common Questions at this Stage

1. What happens if it looks like the market is over-served?

I asked Tony and his team about this last week at an innovation conference in NYC. Is there opportunity for innovation if everyone seems over served? The answer — make it cheaper!

If you can find a way to reduce cost using XR, you can dramatically innovate in seemingly over served markets. Until the time it takes to do the task is at zero and the predictability of getting it done right is at 100%, there’s room for innovation. XR is an incredible opportunity to disrupt very established markets in the enterprise like logistics, food service, training, industrial design, manufacturing, healthcare, and productivity to name a few.

2. Why can’t we just go after all of them?

This question often comes from startups, and yes, if you’re creating something that has little to no competition then by all means just pick the needs you think are most unmet and just go for it.

Having said that, most XR products are replacing things that already exist either in digital form or in real life. Even if no one else is using XR as a solution, your customers still evaluate your solution based on how well it solves their problem in relation to other solutions.

3. But… don't we run the risk of waterfall-ing?

As a strong advocate for lean processes, please hear me on this. Finding new markets is different than designing products for those markets. Most organizations, especially startups, skip straight to designing solutions and stumble to find the right market after the solution is designed.

Products should always be designed very quickly and iteratively alongside the customer — but finding the right group of people to serve comes first. I’ve run them in parallel before — doing the research and designing the solution at the same time. It works sometimes.

Choosing the Group that Will Love You

Recognizing market segments are real people

Women in Crossfit are a great example of a tribe — they’re real, cutting edge, they have a strong point of view, and they’re magnetic to other Gen X’ers and Millennials.

Through your research, you’ve found pockets of the market that are underserved — now let’s find the real people behind this data.

Most companies define markets by solutions (the VR market, the RPG game market, the enterprise software market), by consumption group (millennials or boomers), or by internal psychographic profiles with names like “the challengers” or “the homebodies”.

Have you ever noticed these definitions are hard to build solutions for? These groupings give us very little insight into what customers actually need from our products.

This is where the tribe concept really works its magic.

A tribe: a group of people who share common interests within a consumption group.

A tribe is a small subset of the total target market, but they represent the essence of the product or experience you’re designing. They’re the people that see your product as an amazing choice — the people you think of when you design the product and the brand around it. Is this conversation often wrapped into brand? Yes. Will it benefit you greatly to think of them in product design? Absolutely.

Again, I’ll reference my innovation conference from last week. PepsiCo has really nailed this tribal targeting and defined 4 traits of a tribe.

4 Traits of a Tribe:

1. A tribe must be magnetic to your consumption group. Your target market doesn’t need to fall into the tribe but they do need to be inspired by it. Gatorade has designed their product and brand around pro athletes. Even though 99.99% of Gatorade drinkers are not pro athletes, the tribe is aspirational to the consumption group. They are the heroes over the group.
2. A tribe must be a part of a cutting edge trend. Right now, female entrepreneurship is a hot topic. Designing products with young female entrepreneurs in mind can be a stronger position than targeting all business owners.
3. A tribe must be real, not just an internally defined psychographic group. These people must do things together in the real world. Think about the kinds of groups that would create Meetups in big cities. Fictional World Designers are a real tribe whereas “status quo challengers” is probably something made up by an analyst.
4. A tribe must be a white space in the market. Not only does the group have unmet needs — it has a strong point of view. Your AR tool for choosing furniture could target people who live by the Jonathan Adler Manifesto. Now that’s a tribe! It’s counterintuitive, but having a narrow focus will actually give you a broader reach.

The process of finding a tribe is more of a cultural art than a science, but I’ve found it helpful to start with the segments from your market research, than do some field work to pick up on relevant cultural trends. Stalk the shelves to see what they’re buying, try finding relevant Meetup groups and try mining social media for clues. Most importantly, surround yourself with people who are culturally in-touch.

The result of all this work should be able to fill out a canvas like this.

This is a collection of things I’ve learned from experience and from others. If you’re working on a new product, especially an immersive product, I’d love to hear how you’re thinking about this process.

In Part 2 we’ll talk about creating your match hypothesis — how you’ll be using AR/VR to innovate in your market.

This is a collection of things I’ve learned from experience and from others. If you’re working on a new product, especially an immersive product, I’d love to hear how you’re thinking about this process.