Lean development of new products significantly reduces risk
You no longer need to ‘bet the farm’ on getting everything right at the start and committing to a large front-ended budget.
It’s extremely rare to know all the answers at the start. Whilst it’s common to find business failure and budget overspend and even more common to find the successful end-product is very different to that envisaged at the beginning of the journey. What makes the difference is timely discovery. Discovery that leads to different judgements about how sustainable profit will be generated and competitive advantage developed.
From my experience, people don’t spend other people’s money in the same way they spend their own, and their risk/reward calculus is often different. Give people a big budget and they will spend it. Ask them to invest their own money and things suddenly look different. Lean management is not about spending less, instead it’s about accepting some of the underpinning assumptions for success are probably wrong but you don’t know which until you start attracting, activating and retaining customers, and start to scale the business. My interpretation of lean management is that you don’t commit significant resources or crystalize the business model until you know your right about the most important assumptions. You’re not trying to build the best possible product or service before you launch – just the one you think you’re able to sell at launch and start the process of testing your assumptions i.e. quickly learn what’s right and what’s wrong, inexpensively.
You must start somewhere. So where?
Something I’m asked frequently is where do you start. The short answer is with a Minimum Viable Product – essentially the basic features of a customer solution to a defined customer problem, combined with the supporting business-model framework. Something you’re not wedded to. Something you realise will probably change when you engage with real prospects and customers. As Mike Tyson said: “everyone has a plan until they get punched in the mouth”.
For me the critical underpinning questions I need to answer in supporting the development of the client’s product strategy are: –
- Do customers recognize they have the problem to be solved and the problem is more than a minor inconvenience i.e. it’s worth solving?
- If there was a solution would they buy it. And would they buy it from company ‘x’?
- What does success or winning look like and does this meet management’s aspirations? And over what timeframe?
- What are the critical underpinning assumptions that need to be correct to assure the ultimate success of the new product: features/benefits, customers, competitors, resources, cost-to-acquire model, cost-to-serve model, partners, key capabilities and profit formula need to be correct to ensure long-term success?
- What tests or evidence will prove or dispute key assumptions?
The road to discovery: pre-launch discussions
The road to discovery is all about customer engagement. I particularly focus on the process of attracting, activating and retaining real customers. Customers that fit the target profile. If you’re selling to existing customers, I’d start discussions with the most loyal and closest. If you’re selling to new customers then it’s about getting out the office and in front of prospects any way you know how. Almost without exception, my discussions have yielded new insight and understanding, for example: how to introduce and position the concept, key messages, the relative importance of different elements in the customer journey, primary sales obstacles, and so on.
Ordinarily, I ‘sell’ the discussion by underlining the opportunity to shape the final solution to the benefit of the buyer/customer, assure complete anonymity and confidentiality, and conduct the discussion on the phone or face-to-face at a time and location that’s most convenient to them. People are generally pleased to help when they know your independent and seeking to help both parties: the supplier and buyer.
The road to discovery: post-launch adjustments
Pre-launch discussions with customers and prospects get you to the point of launching your new product or business as a Minimum Viable Product, supported by your best guess at all the underpinning assumptions, mentioned earlier. But your intention should be to fine-tune the product, customer journey and business-model as you learn more about marketing and selling, good and bad customer experience, working processes, etc. Some example ways to pivot are described below.
New Benefits: enhancing the product by incorporating new features that are valued by the target audience. Enlarging the solution.
Deep Dive: reducing the number of proposition features/ specification so it does just one thing exceptionally well.
Simplification: taking away unnecessary complexity and waste in the business-model.
Automation: either increasing or reducing the degree of human interaction with customers throughout the customer journey.
Re-segmentation: solving the right problem in the right way but for a different customer segment.
Remodeling: changing elements of the revenue-model and/or cost-model to meet internal profit aspirations.
Market Access: changing the way customers access the product/service to improve quality and convenience.
Only after proving the underpinning assumptions and making timely adjustments to the new product and business-model does the company then commit to significant marketing spend, right-size the sales force, invest in back-office support functions and necessary infrastructure, etc. At this point management have significantly reduced the likelihood of being wrong in a catastrophic way. Management are invesing with a greater degree of confidence.
