Building Pipelines Not Products
When a CEO contacts me about Product Opportunity Mapping, they usually want to talk about a new product they are considering or in the midst of developing.
They are excited by its prospects and what it could mean for their company but want to talk through what it will take to make it a success. We dig into the fundamentals by discussing what problem the product will solve (and whether the problem is worthwhile solving), the customers, the direct and indirect competition and what “secret sauce” they can bring to the table.
The conversation then turns to validating these factors and how much cash and time will be needed to build the product and bring it to market (both are usually underestimated).
These get discussed in casual conversations, white board sessions or more systematically in detailed review meetings and doing so fills the gap between when a new product idea is brainstormed and when decision makers are ready to hit the “Go” button.
The outcome makes the CEO feel either better - or worse - about the investment decision they need to make.
Hitting the “Go” Button
Often, the CEO wants to make a Yes/No decision on whether or not to proceed but this rarely happens. As a new product idea is an imperfect notion and work is needed to add hard edges, it is more likely upfront decision-making will have four possible outcomes: Go, Hard No, Pivot or Park. This allows the product team and executive sponsors to keep advancing the idea until their internal risk/benefit threshold can be surpassed (or not met).
This is especially true when a company wants to develop products that differ from their current core offerings (which is the focus of the Product Opportunity Mapping framework) which means a journey into uncharted waters with new customers, business models and target markets to be considered. In all cases, the upfront analysis should tie directly to a broader corporate strategy and making choices on where to invest finite time and cash resources.
A strong new product development (“NDP”) analysis will identify the costs that need to be incurred as well as expected timelines but I can also say with 99% certainty these will be underestimated – especially the timelines.
From my personal experience with the startups I have run (which are much like a product development effort in themselves), we would roughly track our original time estimates and over time figured out it wasn’t a bad idea to multiply our schedules by 2.5. (I mentioned this to serial entrepreneur James Keirstead and he said he does the same thing and uses a “Rule of Pi” which is to multiply everything by 3.14). Estimating gets better with experience but it’s not a bad idea to overcompensate at the beginning.
Taking a Step Back and Creating Product Pipelines
It's always worthwhile for a CEO to take a step back and question why they are undertaking a NPD effort in the first place. NPD is an obvious path forward when a company wants to grow and diversify their revenues but what many CEOs don’t fully appreciate is that the majority of new product development efforts fail or don’t meet expectations. CEOs need to realize they are taking on a lot of risk by developing a single or a series of one-off products .
Instead, if new infrastructure needs to be put in place to develop one product, it may make more sense if it can serve multiple product opportunities. This mitigates the risk of failure, increases NPD ROI and casts decision-making in a new light as infrastructure investment decisions can be made in the context of amortizing costs over several products offerings.
For example, if a company is currently focused on business-to-business products and wants to diversify into business-to-consumer markets, it is likely significant investments will have to be made into building new marketing and sales channels, developing new customer relationships or bringing in new technical capabilities. This would be an expensive endeavour if only one product was involved.
In another instance, I recently worked with a company who identified a promising opportunity to create artificial intelligence-based products by monetizing the data they had been collecting for years. This translated into a significant product opportunity but they realized that for it to be scalable, a company-wide investment would be needed to better collect, manage and maintain their data. This investment could not be justified based on one product so they had to take a step back to see if other product opportunities could be identified to take advantage of the upfront investment.
The best strategy is therefore not to “develop a product” but instead “develop a product pipeline” and creating a system for continually identifying, evaluating, selecting and monitoring new product opportunities.
Yes, this requires a larger investment upfront and also means the entire discussion should be part of a company’s annual corporate planning and strategy process. This ensures the executive team is on board and sufficient resources are allocated to the effort.
A Final Thought… Evolving a Product Pipeline into a Product Portfolio
Improving internal skills to develop new products is critical for building long-term revenue growth and corporate resilience. How it’s done varies from company to company but it’s always a best practice to do two things:
Hold regular internal sessions to identify, evaluate and select new product opportunities (and make the Go, Hard No, Pivot or Park decisions) so that ideas can be advanced or killed in a timely fashion.
In-between these sessions, build in accountability and coaching to monitor progress. NPD is filled with uncertainties and when undertaken in a larger organization, ongoing day-to-day activities and work pressures will often put new product initiatives on the back-burner. New product development needs to be actively managed and requires senior executive oversight.
In essence, what CEOs or senior management teams need to do is build an investment portfolio of new product opportunities with each one having a different level of risk and reward. The overall portfolio can then be aligned with corporate strategy and growth objectives while also being balanced with short- and long-term resource allocations and decision making.
This is a great topic to dig into for any company and I love having these conversations so feel free to reach out if you would like to talk about NPD strategies in greater detail. I can be reached at bruce@a-partners.ca.