10 Levels of incremental product development

I have two kids, one in karate and one in gymnastics. Once a week I watch each one practice their sport. Competitive gymnastics uses leveling system that goes from 1 to 10. In karate, color belts represent different levels of skill, starting with white, ending in black, with several different colors in between. In both cases stakeholders can quickly adjust their expectations about a person from this shorthand knowledge. Coaches and teachers know immediately what to expect from a participant and can see what the individual needs to work on to get to the next level.

I believe that product ideas can follow a similar road. In this article I’m going to propose a leveling system shorthand to help communicate the maturity of a product idea.

Level 1: Just an Idea

This is the back-of-a-cocktail-napkin level. We might be just talking, and the idea is in the range of: “Hey, you know what would be cool?” That’s a Level 1 idea. It’s a playful thing that can provoke more conversation and might seem valuable enough to write it down. No research, work, market studies, or design have gone into it. Most ideas stay at this level.

Level 2: Developed Idea

At this point I’d expect the idea has an elevator pitch, user stories, and key screens. The idea may have a pitch deck as well. Maybe not a super-polished, researched pitch deck, but at least a decent attempt at the Alliance of Angels criteria.

You can put together all of this work in under a week if you’re diligent. Although for our team, we seem to have several ideas under construction in tandem, and so we’re continuously updating them. What’s nice about Level 1 and 2 ideas is that they don’t require any real commitment. We’re still playing as we gather this information, and the concepts can be moved forward incrementally.

But you should notice that there’s a difference between Level 1 and 2 ideas: Anyone can conjure up a Level 1, but it takes time and to properly parse out a Level 2.

Level 3: You’ve Got an Internal Prototype

The next step is to try the idea. This is really an exercise in creativity. For a game, it might just be a stack of note cards and a spreadsheet. For a flying machine, it might be a model. The challenge here is to be resourceful and figure out a way to use the idea with the least amount of work. No one expects to release this prototype—it just needs to be enough to demonstrate the experience.

At this level, you get to be proud of writing the least amount of code or building your prototype from junk around your house. Now you’ll likely spend several iterations adjusting your user stories, screen designs, and previous documents. The goal here is to determine the product design that you’re going to commit the time and money to release in a private beta.

Level 4: Private Beta

This is where you’ve actually built and released the product to friends and family. The idea needs criticism from people who are not as obsessed with it as you are. They need to be able to say things like: “Oh, I forgot to use it,” or “I didn’t log in because I didn’t want to create an account,” or “I really have no idea what I would do with that.” It’s this criticism that sends you back to your designs to adjust them and try again. To get past this level, the idea must be something somebody would actually use. Through your private beta, you should have an answer to this question.

Level 5: Public Release

Time to release your idea into the wild. Make sure you’ve added a way to track what people are doing with it and if it’s spreading anywhere. Whatever criticism you heard from friends in Level 4, you should expect it tenfold in Level 5. This is all about watching what people do with your idea and asking questions. If you’re an engineer, this is the point where it gets challenging. All the coding and technology puzzles are somewhat solved, and now it’s all about the users.

Until users are consistently using your product, you’re not past this level. It has to solve someone’s problem better than the way they’re currently solving it. So keep iterating and solving their issues to see if the idea can work its way to a market. Some activities you might be doing at this point are: trying ads to get into markets, interviewing users about the experience, and working on UI/UX issues where users are getting lost.

Level 6: You’ve Got Users

Someone is using your idea! Now you need lots of people to use it to qualify as an audience. Keep experimenting with different ways to connect to the audience and how more users discover you. Common questions at this level are “Who is using this?” and “What are the alternatives?” and “How do you grow it faster?”

You need to set a realistic expectation for audience use, and that depends on the idea. Success could mean that 10,000 people have used it, 20 people have installed it, or 1 hospital is using it; it really depends on the idea and what “success” means to you. But if you’ve come this far, you’re doing well. From here you’ll continue to iterate and improve the features, experience, and marketing. Once you can define who these people are and how you find them, you’re ready for the next level.

Level 7: You Know Your Audience

At this point you should be able to show that the audience is growing organically. Whatever strategy you’ve devised is working, and people are spreading it. Now your problem is growing the service in a way that doesn’t break everything.

This is what they call “a really nice problem to have.” But you have to figure out how you’re going to grow it before you actually grow it. I know many companies that ended up with legacy code that is very hard to extract because they grew too fast. A good place to start is to model how many people and what resources you will need to satisfy larger and larger audiences. Then focus on ironing out the wrinkles that slow the growth of the user base.

Level 8: Product is Scaling

Now users are on-boarding organically, and the system can keep up with it. This is exciting, but there’s a problem: You’re still paying for your idea. To truly test if it is valuable, you need to make money with it. Early on you created business models for how this can work. Perhaps you are selling something directly to users, maybe you will collect ad revenue, this could even be a business to business relationship. You must prove that your idea can generate the revenue that you predicted.

Once upon a time we created a game called Quirks. It was a simple game that we only released for free on the iPhone. We sort of forgot about it until I logged into iTunes and realized that we had several thousand users playing it every day. So we decided to charge $1 to install it. Immediately our usage dropped and I think we earned about $20 doing that. The reality was that our business model did not work and we should have released a paid version and carefully added features to make the game valuable enough for someone to pay for it.

Level 9: Validated Business Model

As the title suggests, if you’re at Level 9, your user base is growing and you’re on the way to profitability. You should have a great spreadsheet that shows how the whole thing will come together in a cash flow-positive way. Your tasks now are to continue to iterate and discover issues with your business model, all the while adjusting your product to fit what the market will handle.

Keep growing and scaling the business. Imagine yourself a gardener that is carefully watering and weeding around a plant. If you do everything right your spreadsheet model should fit your predictions and the whole business will balance itself out.

Level 10: Cash Flow Positive

Congratulations, you have a self-sustaining business. Now you have lots of problems that are good problems to have. Maybe you have too many customers, or you need cash to grow your idea, or other people want to steal it, or you need to hire more people. These are great problems to have, be thankful.

Conclusion

I’ve got a lot of ideas floating around. I might put a month into one of them, here or there, but it’s often hard to compare them because they’re at different levels. This leveling system allows me to quickly define how mature an idea is, so I can set expectations accordingly, much like a coach or teacher does in gymnastics or karate.

These levels should help you to judge how far an idea has been grown as well. It gives you a realistic view of how far you really need to go to get your idea to a stable place. Product creation can be a long road, this is a good way to see how far you have gone.