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6 min read

Product velocity: First-to-market or first-to-fail?

Understanding product velocity helps your team quickly move from concept to reality, securing a competitive advantage. Learn what it is and how to use it.
From Team '23

Tempo Team

During a product launch, getting out of the gate first can play a significant role in success. Especially for consumer packaged goods (CPG), the new kid on the block has a higher chance of cornering the market and securing loyalty among early adopters. 

But making a splash in the marketplace isn’t luck. Product managers know it takes months to bring a great product from the drawing board to the store shelf, so they need to move quickly if they want to get there first. The speed of the development process is known as product velocity. It’s a key factor driving success and growth.  

What is product velocity?

Product velocity measures how fast the product team delivers a 

  • New product

  • New product feature

  • Product enhancement

  • Additional value to customers

Along with productivity, velocity quantifies the group’s efficiency and capacity to adapt in response to user feedback.

In addition to benchmarking the development lifecycle’s speed, velocity refers to the pace of meeting market demand or solving customers’ problems. It describes how quickly the product can adapt to changing market conditions.

Optimizing the product development and launch process depends on understanding product velocity.

The importance of product velocity

Product velocity indicates the overall health of the product development process. A high velocity means the product team is efficient and effective. The manager allocates resources well, and members collaborate productively to evolve the concept. 

Product velocity is also a key performance indicator (KPI) for market responsiveness. In a dynamic economic environment, responding quickly to market forces provides a crucial competitive advantage that ensures longevity. A product that adapts to changing customer requirements or solves new problems demonstrates adaptability, indicating high product velocity. As a result, customers will favor products that respond to their needs, boosting brand loyalty and contributing to the bottom line. 

What can influence product velocity?

Two primary factors contribute to product velocity: product development process and market responsiveness.

Product development process

Product management and operational team efficiency significantly impact the speed at which an item moves through development. It’s affected by the following factors:

  • Quality of the product vision and concept

  • Efficiency of the prototyping and testing processes

  • Effectiveness of the marketing team’s launch strategy

Market responsiveness

Market responsiveness determines whether your audience recognizes and rewards your product’s value. Even if the product was efficiently developed and launched, sluggish sales metrics could indicate low velocity.

Many factors influence market responsiveness, including:

  • Marketplace dynamics

  • Customer behavior

  • Competitor activity

How to inspire product velocity

To quickly deliver quality products to market, you need a well-oiled research, design, and development team. Approaching product management from a people-first perspective improves product velocity and accelerates development milestones. Here’s how to do it:

  1. Ensure psychological safety: Not every concept will be a winner. Mistakes point you toward success, so encourage your team to “fail fast and fail often” to help discover what works and doesn’t.

  2. Encourage positivity: Product development is fraught with uncertainty. Approach ambiguity with optimism and your team will follow. 

  3. Pace yourself: Although product velocity advocates for speed, you shouldn’t sacrifice long-term success for short-term wins. Organizational alignment ensures you deliver outcomes with marketplace longevity.

  4. Consider the audience: Be mindful of stakeholders and their capacity to support development. Create a detailed product roadmap outlining the development process to gain supporters’ confidence and bring departments on board. 

  5. Align stakeholders: Collaborate with stakeholders to establish a product development plan and build support before seeking approval for the roadmap. Their emotional investment can influence a successful sign-off.

  6. Promote accountability: Establish metrics to gauge product velocity and direction, improving visibility and encouraging cohesion. Once established, determine who is accountable for achieving them. 

How to measure product velocity

Tracking product velocity within the marketplace influences your organization’s approach to increasing sales. To measure velocity, calculate sales and consider distribution. The simplest calculation is:

Velocity = Sales per Store ÷ Distribution

This formula offers a high-level perspective, helping you examine factors impacting sales, such as product placement, price, and other competitive considerations. However, in-depth insight requires different metrics. 

Note that product velocity differs from sales velocity, which measures revenue generation speed.  

Choosing the right velocity measure

Which metric you choose depends on whether you compare velocity across different markets and vendors or within a single market or retailer. 

1. Sales per point of distribution (SPPD)

SPPD analyzes sales within a single market or retailer. The calculation incorporates store size using a weighted distribution based on the annual contract value (ACV).

SPPD = Sales ÷ %ACV Distribution

The calculation helps you compare different products’ velocities to see which performs better in a single location.

2. Sales per million (Sales per $MM ACV)

The Sales per million metric compares a retailer to the remaining market, market region, or sales channels. It calculates the product sold for every million dollars of total market sales. 

Sales per million = Sales ÷ % ACV distribution × (Market ACV ÷ 1,000,000)

Placing ACV in the denominator corrects for market size, accurately evaluating how the product performs in various forums or geographic locations.

The challenges of product velocity

Being first off the block offers significant rewards, but a high product velocity comes with risks. You might launch in the wrong market or fail to prepare your audience for the solution.

These situations, and others, can set you back. Before you launch, consider and prepare for these common hurdles:

Competing goals

Different goals or constraints from other groups within the product team can lead to last-minute alterations to the product. No matter how minor, they delay the launch and frustrate the team. 

Solution

Ensure clarity among working groups regarding product goals and objectives. Facilitate communication and mediate competing goals to ensure alignment.

Localized products

Product velocity may slow down as you scale your offering to produce local product versions.

Solution

Instead of rushing through geographical adjustments, budget for scale, build timelines, and manage resources to ensure localized product versions meet customers’ expectations.

Interpersonal issues

Operating with ambiguity often leads to anxiety and frustration among team members. When this happens, tempers can run short, leading to division and a lack of cooperation that slows everyone down.

Solution

Lead with empathy, energy, and optimism. Rely on your soft skills to bolster communication between groups and maintain transparency.

How fast will you go?

To deliver high product velocity, your team needs to know where it’s going. Provide a detailed product roadmap for your team with Tempo’s Strategic Roadmaps tool. Roadmapping offers visibility into the product development process, simplifies prioritization, and identifies task dependencies while improving team communication and alignment.

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