Product maturity stages: Key actions and milestones for each phase

Drawing on some of the world's most influential writing on startup building and product development, this article lays out what a team should be doing at each stage of a product's maturity. We hope it serves as a useful reference for your own product development.

The stages are presented below in order: Stage 1: Customer Discovery & Product Discovery; Stage 2: Customer Validation; Stage 3: Customer Creation; and Stage 4: Company Building.

Stage 1: Customer Discovery & Product Discovery

Starting from the founders' vision and ideas, this is the stage where you identify the problems customers genuinely face and test whether your concept actually addresses them.

Status

• Goal: Identify a serious customer problem and find signs of a potential product–market fit (that is, a fit between the problem and your solution).
• Profitability: None. This is a period of burning cash while you learn and discover.
• Target audience: Not yet clearly defined. You are searching for potential "evangelist users"—people who are aware of the problem and are already hunting for some kind of solution on their own.
• State of the product: Still a prototype—an idea, a paper mock-up, or a "low-fidelity MVP" such as a web page or slide deck with no working functionality. Full-scale development has not yet begun.
• State of the team: A small team made up of the founders and a handful of core members (a cross-functional product development team). There is no formal sales or marketing department.

Actions

• Choose a market worth at least $10 billion in annual revenue: Venture capitalists must deliver high returns to their fund's limited partners (three times the invested capital or more), so they depend on a tiny number of winners that generate outsized returns. With the market's growth potential in mind, look for customers and products that can constitute a market of $10 billion or more in annual revenue.
• Get out of the building and talk to customers: Rather than speculating in a conference room, go and meet customers where they are, and dig deeply into their day-to-day work and the "pain" (problems) they are living with.
• Form hypotheses about the business model: Use a tool such as the Business Model Canvas to articulate your hypotheses about who the customer is, what value you provide, and how you will make money.
• Validate with prototypes: Show customers a low-fidelity MVP or prototype and test whether it solves their problem (value), whether they understand how to use it (usability), and whether it can be built technically (feasibility).
• Decide whether to pivot: If customers respond with indifference, "pivot" by substantially changing elements of the business model (the target segment, the feature set, and so on) and run the validation cycle again.

Milestones that mark completion of this stage

• Number of prospects developed (B2B): You have identified at least five companies that are highly likely to actually place an order for the product.
• Customer advocacy (NPS): As a measure of how strongly customers care about the problem or need, your Net Promoter Score (NPS)—which asks how likely people are to recommend you to others—is 50 or higher (ideally well above that).
• Web/mobile behavioral metrics: In terms of hard behavioral data, are you clearing benchmarks such as the following?
  • Every new customer invites 10 friends, and half of them sign up.
  • One-third of visitors return to the site within a week.
  • One-quarter of visitors refer an average of 1.5 friends within a week.
  • Sessions last an average of 10 pages or 10 minutes per visit.

Timeframe

• A few months to about a year to explore the idea and prepare: roughly one to six months of research, followed by another two months to a year spent preparing a business plan and pitch.
• A few weeks to about a year for the customer discovery process itself: this varies greatly depending on the type of market.
  • In an existing market: a few weeks to a few months, since customers and needs already exist.
  • In a new market: it can take more than a year, because nobody yet knows the answers.
• Speed of validation (iterations): Test ideas with prototypes at a pace of 10 to 20 iterations per week. Alternatively, a method known as the discovery sprint runs a full learning cycle—from building a prototype to user testing—in five days.

Stage 2: Customer Validation

In this stage, you build an initial product based on your validated hypotheses and prove that you can actually sell it to customers—in other words, that the business model holds up.

Status

• Goal: Achieve product–market fit (PMF) and build a repeatable, scalable sales model.
• Profitability: You start winning a small number of early orders from customers, but the company as a whole is still nowhere near profitable.
• Target audience: Innovators and early adopters (evangelist users)—people who share the product's vision and will happily buy it despite bugs and missing features.
• State of the product: You are effectively shipping a prototype (V1)—a "high-fidelity MVP" with only the bare minimum of features.
• State of the team: Still small and still feeling its way. Functions such as marketing and legal may be outsourced, and a seasoned sales professional may be brought in on a spot basis to close the first orders.

Actions

• Make decisions based on vision and intuition At the V1 stage, reliable data is either nonexistent or extremely scarce. Your primary decision-making tool is therefore your vision: what you want to build, why you are building it, and who it is for. On top of that, draw on what you learned from customer research and on your intuition to work out how you can solve the customer's problem.
• Prove that early adopters will buy (marketability) Instead of chasing perfection, put the product on the market even if it is essentially a prototype, and test whether novelty-seeking "innovators" and "early adopters" will actually buy it. If you cannot prove that they will, you must go back to the design stage and start over.
• Move fast by leveraging external resources (outsourcing) Because the team is small in the early days, functions such as marketing, PR, HR, and legal are outsourced as you feel your way forward. This is expensive and does not scale, but borrowing outside capacity lets you get things done quickly at first.
• Go to market with a minimum feature set (MVP): Rather than piling on features in pursuit of a perfect product, strip away everything unnecessary and get an MVP that solves just the single most important problem into customers' hands as fast as possible.
• Run paid test sales: Instead of giving the product away, test whether customers will actually pay for it even in its unfinished state, and use that to confirm the business model is sound.
• Build a sales roadmap: Map out the customer's organization chart and buying process—who makes the decision, who controls the budget—and establish a reproducible sales procedure.
• Keep cash burn low: Until PMF is achieved, do not pour money into a large sales organization or marketing campaigns.

Milestones that mark completion of this stage

• Number of paying customers (enterprise/B2B): You have secured three to five purchase orders from evangelist users at full list price, without heavy discounting. Once you hit this mark, you can consider it safe to start building out and scaling a sales organization.
• Repeat orders (B2C/consumer goods): For products sold through consumer channels, you are seeing clear repeat orders, not just one-off purchases.
• Number of reference customers: Within a specific target market, you have won six reference customers—customers whose success stories you can cite to other prospects. Reaching this milestone normally lets you declare PMF in that market.
• Quantitative PMF indicator (the Sean Ellis test): More than 40% of users say they would be **"very disappointed"** if they could no longer use the product.
• Unit economics (LTV and CAQ): Customer lifetime value (LTV) reliably exceeds the cost of acquiring and activating a customer (CAQ, or CAC) — that is, LTV > CAQ. In other words, every dollar invested in customer acquisition generates more than a dollar in value.

Timeframe

• 9 to 18 months to release the first product (V1): For any new project, hardware or software, the sweet spot for time to ship is 9 to 18 months, with 24 months as the upper limit. Beyond that, you delay finding out how the market responds.
• A few weeks for web/mobile: A web or mobile startup can launch in weeks rather than years. Ideally, a low-fidelity MVP (such as a web page with no working functionality) should be live on day one of the company.

Stage 3: Customer Creation

In this stage, you expand the market and move further along the customer adoption curve.

Status

• Goal: Cross the market chasm, win mainstream customers, and grow market share.
• Profitability: Per-product economics (gross margin) begin to turn positive, but because you are investing heavily in demand creation, the company as a whole is still not showing a net profit.
• Target audience: The early majority (trendsetters and pragmatists). They decide to buy only after seeing reviews from early adopters, and they expect a bug-free product with proper support.
• State of the product: V2—a version in which the failures, bugs, and unforeseen problems uncovered in V1 have been fixed on the basis of real data, and functionality has been substantially expanded.
• State of the team: Drawing on the know-how gained from outsourcing partners during V1, you begin building functions in-house, and the team grows in both size and expertise.

Actions

• Fix V1's failures and compromises based on real data In V2, data and feedback from real, paying customers become your primary decision-making tool. Use them to address and fix everything: the parts of V1 that failed, the unforeseen problems that surfaced after launch, and even the issues you deliberately chose to overlook while building V1. Because you will be itching to apply the lessons from V1 right away, V2 should normally follow V1 without much delay.
• Expand the market to the trendsetting "early majority" Broaden your outreach to the segment that waits to see how early adopters react before buying—people who expect a bug-free product and proper support—and move further along the customer adoption curve.
• Bring capabilities in-house and deepen expertise Using the know-how picked up from third parties (outsourced vendors) during V1 development, start building the same functions with your own people. This is how you grow the team and raise its level of expertise.
• Fix and refine V1: Treat real customer data and feedback as your most important tool. Fix the problems you knowingly set aside while building V1, along with any bugs that have surfaced, and polish the product.
• Invest in full-scale demand creation: Pour substantial funds into PR, advertising, trade shows, web marketing and the like to stimulate end-user demand and steer it into your sales channels.
• Establish company and product positioning: Settle on the type of market you are entering (existing, new, or resegmented) and communicate a clear message about how you differ from competitors and why customers should buy your product.

Milestones for completing this stage

• Positive gross margin (unit economics): Every time a unit of the product is sold or a service contract is signed, the gross profit is positive. Because demand-creation marketing and similar activities cost enormous sums at this stage, it is fine for the company as a whole to still be running at a loss.
• Viral growth coefficient: For web/mobile products, the "viral growth coefficient" (viral coefficient)—the rate at which referrals from existing users bring in new users—is 1.0 or higher (that is, each user activates at least one new user).
• Predictable sales funnel: By applying the same strategies and tactics laid out in the established sales roadmap, you can reliably and predictably move a flow of suitably profitable customers through the sales funnel.

Timeframe

• 2–3 years to positive unit economics: It takes two to three years to win market acceptance and reach the point where each unit is profitable.

Stage 4: Company Building

Once the product has proven that the market accepts it, this is the stage where you open up end-user demand in earnest and scale the business.

Status

• Goal: To make the company profitable at the bottom line and scale the business to a sustainable size.
• Profitability: Revenue exceeds operating expenses; sales volume grows and the company as a whole begins to generate a net profit.
• Target customers: The late majority and laggards—mainstream customers who expect a flawless product and will not tolerate even minor trouble.
• State of the product: An already excellent product is polished even further. Rather than a standalone product, it is delivered as a "whole product" (a complete solution) that includes onboarding support and surrounding services.
• State of the team: The organization shifts from an informal unit dedicated to learning and discovery to functional departments—sales, marketing, business development and so on—built to execute processes (highly responsive departments). Headcount expands from dozens to thousands (from tribe-size to city-size).

Actions

• Focus on optimizing the business as a whole, not the product The product itself is already good enough, so the focus now shifts to the business itself. Negotiate better terms with sales partners, optimize customer support and sales channels, and broaden your advertising media—all with the aim of expanding sales volume and bringing down costs (and prices).
• Polish every customer touchpoint V3 targets the "late majority" and "laggards"—customers who demand a perfect product and won't forgive even minor trouble. To satisfy them, improve and refine not only the product's features but every touchpoint across the customer lifecycle: advertising, packaging, the purchase process, support and more.
• Build expertise in-house and outsource selectively Within the organization, concentrate your in-house teams on the areas most critical to the company's differentiation, such as branding and legal. Smaller tasks, on the other hand, go back to outside vendors—but this time not by trial and error; the in-house team keeps them under firm supervision.
• Optimize the whole business: Go beyond product feature development and concentrate on improving every customer touchpoint—customer support, sales channel optimization, better terms with sales partners, and so on.
• Build a functional organization and introduce a management layer: To head off the breakpoints that come with a growing team (such as communication breakdowns), put middle managers in place and define formal missions for each department.
• Manage strategy and objectives (OKRs): Get a management system such as OKRs working, in which leadership sets out the product vision and strategy and empowers each team by giving it problems (objectives) to solve.
• Outsource selectively and focus on differentiation: Concentrate in-house resources on the differentiators that matter most to the company, such as branding and legal, and set up a structure for outsourcing smaller tasks under in-house supervision.

Milestones for completing this stage

• Positive bottom line: Revenue exceeds not just the cost of the product itself but the full operating expenses of running the company, so that the company's bottom line (net profit) is positive.

Timeframe

• 2–5 years to substantial profits: It takes two to five years in total to grow into a business that generates substantial profits at the company level (new markets take especially long).

Closing Thoughts

Breaking the complex work of launching a startup or new business into four phases should make the road ahead feel simpler. I hope this serves as a guide to what your team should be tackling and focusing on right now.

References

• Blank, S. G. (2006). The four steps to the epiphany. Steven G. Blank. 
• Blank, S., & Dorf, B. (2012). The startup owner's manual: The step-by-step guide for building a great company. K&S Ranch. 
• Cagan, M. (2018). Inspired: How to create tech products customers love (2nd ed.). John Wiley & Sons.
• Cagan, M., & Jones, C. (2021). Empowered: Ordinary people, extraordinary products. John Wiley & Sons.
• Fadell, T. (2022). Build: An unorthodox guide to making things worth making. Not Shakespeare LLC. 
• Hoffman, R., & Yeh, C. (2018). Blitzscaling: The lightning-fast path to building massively valuable companies. Currency.