If I were to say that new product development was a key driver in business growth and profitability, I doubt many people would fall off their chair in surprise. But as we enter an unknown future with many businesses tightening their belts, now may feel like the wrong time to invest in something new. In my opinion, now is the time we should be taking stock, reflecting on what customers really care about, identifying opportunities and creating new products that will help businesses rapidly recover in economic uncertainty. However, it stands to reason that we need to approach innovation and new product development in a more cautious way to prevent the levels of wastage we’ve seen in the past.
I was saddened to read about Bó, the RBS challenger bank killed after 6 months in the market. Having spent over £100m and with a customer base of just 11,000, the main reasons cited for its closure was a crowded fintech market and changes in circumstances. To me, this points to a lack of product/market fit due to not having understood customer problems in any great depth, but that’s not for me to judge. Bó is certainly not the first casualty we’ve ever seen, or will see in the coming months. Over the years we’ve seen successful organisations with established products miss objectives and lose out to competitors, even in more stable times.
Unless organisations equip themselves with the knowledge of how and when to abandon traditional business practices, products will continue to fail to meet their objectives and nothing will change. We need new thinking and new processes to build products that will result in business growth, now more than ever.
The core principles
To mitigate the risk of failure and enormous waste, businesses need a process to rapidly yet methodically explore and validate new products, resulting in proven, investible business models. To be successful, this process should be built around a set of 5 simple principles.
Create the right framework.
To succeed you need the right stakeholders, strategy and governance in place. Innovation and new product development away from the rest of the business is rarely successful, often resulting in blocks or delays by legal, risk or brand reputation concerns down the line. You need to bring the people in your business on the journey with you, with rigorous vetting procedures and gating mechanisms to invest only in products that continue to meet set criteria, and to prevent waste. This framework is your safety net, keeps you honest and creates trust in your ability to succeed.
Identify opportunities by talking to customers.
Market-leading products either solve a problem that hasn’t yet been solved, or solve it in a new way. But the problem needs to be big enough for your customers to care to begin with. To ensure you build something that matters, you need to really get to know your audience; not only their problems, but their mindset and their motivations. Only then will you understand the opportunity space and its size, and come up with innovative new ways to solve big problems that your customers actually care about.
Make assumptions, but find ways to prove them.
Creating new products requires many assumptions to be made, and it’s important to be honest about where your knowledge gaps are. Start with your most risky assumptions that absolutely must be true for the product to succeed, and find ways to prove them with data through small, cheap experiments. You need a top-down (market-centric) and bottom-up (customer-centric) approach - to ensure your products are commercially viable AND achieve the outcome your customers need.
Be clear about what your product does.
You can’t solve all your customers’ problems, so start with one; it’s much better to solve a single problem completely, than to chip away at a few problems a little bit. The clearer you are about the outcome your product achieves and the problem it solves, the more likely it is your customers will engage with it. You can grow your proposition to solve more problems over time, but start with a clear USP, don’t be vague.
Build, but only when you know for sure.
This is the principle most commonly overlooked - as soon as a product idea is validated, organisations are keen to do the business model maths and move straight into build. However, building a production-ready product is costly, so make sure you know exactly what features you should build, in what order, who it’s for and why. To do this, you can start by building a credible façade without the need for complex technology behind the scenes; it’s amazing at how much of your product can be run manually, whilst still creating a seamless user experience. This way, you learn by running the product without the associated build costs, and delay technical decisions until you’re sure the approach meets the needs of your customers. As you progress and scale, be mindful that technology should be the invisible glue that binds the customer outcome with the resulting business revenue. Technology should solve the problem in the best way for the customer - if you start by picking a technology then working backwards to the customer problem, you’re unlikely to succeed.
New thinking, new growth opportunities.
Despite the current economic uncertainty, we’re at a juncture in time where businesses that invest wisely now can expedite their recovery and reap the benefits in the coming months and years. To do this requires a shake up in our current ways of thinking; a rapid new approach to product development based on a set of core principles to prevent waste and invest only where it makes sense.
Finding new growth opportunities quickly can be challenging, but this approach enables businesses to explore and validate multiple ideas for new products at once, funding only the ones that prove themselves, and resulting in profitable products and business growth.
If you need help embedding these principles, or if you’re interested in finding out more about the successful new products we’ve launched, please get in touch here.