"The key to product success lies not just in technological innovation, but in understanding how to manage the profit curve during product development." This was the core message shared by Felix Hong, former head of Google Nest's R&D center in Taiwan, during the "Global Innovation and Entrepreneurship Talk" on November 15th.
This event was co-hosted by i2i's partners – Mighty Net, Taiwan Global Angels (TGA), and the U.S. startup accelerator EntreCamp.
Drawing from his experience , Felix used the "Product Development-Profit Curve" model to break down the critical phases a product undergoes, from early development to market launch. He emphasized the need to understand the distinct phases of "V1 to V3" in terms of feature development, target customers, and market expectations, highlighting the importance of strategic adjustments at the right time to drive revenue growth.
Three Phases of Product Development: From MVP to Market
Felix outlined how a product evolves from V1 to V3, stressing how each version iteration reflects changes in market positioning and target audience.
"Usually, it's not until V3 that a product starts making real money and achieving net profitability," he pointed out—a reality that many startups often overlook.Product Version and Sales Growth Curve
V1: First Generation Product (MVP)"The V1 product usually doesn't generate profits—it's more about market testing and validating the technology."
Target Audience
Innovators and researchers, those with a strong passion for the latest technologies.
Characteristics
These early adopters are curious about new tech and willing to try an underdeveloped product, even if it lacks features.
They are more forgiving of issues and often want to be part of the product improvement process.
They have an experimental mindset, serving not just as users but as key drivers of product improvement.
V2: Second Generation Product"With V2, companies need to start fixing the flaws of V1 and establish a basic customer support system."
Target Audience
Early Majority—those who are receptive and enjoy trying new things.
Characteristics
These users can tolerate occasional problems, but only if the company responds quickly and provides a solution (fixing bugs and establishing basic customer support).
The goal with V2 is to build trust, refine core functions, and start exploring more effective user support systems.
Felix emphasized that, although revenue may grow during this phase, the company is still investing more than it's making.
V3: Third Generation Product"Only at the V3 stage can companies genuinely focus on net profitability and generate sustained revenue from the product."
Target Audience
Late Majority—customers who are drawn to mature products.
Characteristics
At this point, customers expect the product to be stable and established in the market, without major issues.
During V3, the product has gained initial market recognition, and it's crucial to ensure comprehensive functionality and stability.
The focus should be on UI/UX optimization, boosting marketing effectiveness, and managing Customer Lifetime Value (CLV).
Felix warned startups not to overlook the strategic adjustments needed at this stage, as even products with excellent technology might fail to achieve long-term market acceptance without these efforts.
How to Stay on Top of Market Dynamics?
"Product success isn't just about technological breakthroughs—it's about a holistic improvement in market reach and user experience," Felix explained. He noted that startups often put all their resources into product and tech development early on, neglecting the importance of marketing and customer support.
As the product enters the V3 phase, more resources need to be allocated to marketing, distribution, and customer support. These elements become just as crucial as product development itself.Felix concluded, "Product development is a gradual process. Understanding market needs at each phase is the key to driving revenue growth." He encouraged startups to always stay market-focused throughout the development process, adapting strategies to align with their target audience and ensuring their product remains competitive in the marketplace.
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