Six Steps for Building a New Product Development Program
This summer I’ve had a number of referrals to CEOs and senior executives who are interested in setting up new product development programs within their companies.
They’ve told me their goal is to grow and diversity revenue by developing new products for new markets and also to engage their staff to think more creatively - but they don’t really know the best way to start.
Many have reached out as they are aware of my Product Opportunity Mapping advisory service and my work with companies on three continents with revenues ranging from $4 million to $4 billion and who serve many different industries.
While each of these companies may have a different approach to new product development, their methods share many common threads and my advice to CEOs is to break it down into a six step process:
Step 1: Make Product Development a Formal Part of Your Company’s Overall Strategy
When I get a call about Product Opportunity Mapping, it is often after a company has been spinning their wheels when trying to develop something new. They have a good product idea but the process is not going as well as expected.
Then, as frustrations mount, the CEO or executive in charge starts to ask if this is the best use of company resources – which is a strategy question.
There can be many reasons why progress stalls but it often comes down to the lack of time and money invested into the process.
If you want to be serious about new product development, make it part of your overall corporate strategy and back it up with clear objectives and sufficient investment. By making it a strategic priority (and not something you are running off the side of your desk), it shows the entire the company that new product development is important and needs to be treated as such.
Once the strategy decision is made, advancing new product ideas involves implementing the next three steps.
Step 2: Source New Product Ideas by Identifying Problems to Solve
The biggest failure mode for unsuccessful products is to build one that is looking for a problem to solve. Taking a problem-first mentality is critical but where do you find problems?
New product ideas can come from anywhere but the most important starting point is to talk to customers. It’s a sad but true fact that your customers (existing and potential) don’t really care about you, your company or your products. What they care about is “getting a job done” and seeking help in areas where they are feeling a pain or want to create a gain.
These are “pain points” that when solved create value for customers – and if enough value can be created, it represents a product opportunity. This may be a simplistic way of stating it but it is true for all successful products. Whatever your approach, never create a product looking for a problem to solve.
Another valuable source of problem-to-solve ideas can be your employees. Soliciting their ideas is an excellent way to keep them engaged as they feel they are doing something beyond their direct job responsibilities and contributing to your company’s future success.
For my clients, they generally take one of two approaches when canvassing employees for new product ideas. Some are completely open-ended and ask for any and all product ideas as their goal is to maximize employee engagement and to make it as easy as possible to participate. They are more interested in quantity versus quality.
Others push for a much more directed approach and embrace the key principles of the Product Opportunity Mapping framework which are to articulate a customer problem to solve; who the customers are and where they exist; who and what are the direct and indirect forms of competition; and what is the company’s “secret sauce” or defensible competitive advantage.
This process might exclude some employees who are not close to the market or customers but it does increase the quality of ideas coming into the funnel.
One client I have gets a handful of ideas each month while another gets on average three every day and both need a systematic process to gather and track new opportunities. Also, make sure you thank and recognize those who participate as this encourages ongoing involvement.
Step 3: A Systematic Approach to Evaluate New Product Ideas
Soliciting product ideas is the easy part. Evaluating them is much more difficult but there is a logical process to follow. First, set evaluation criteria. This ties back to Step One and focusing on what strategic objectives your company is trying to achieve. Some companies I work with want to diversify into completely new industries while others are looking at extensions of existing product lines or developing new products for their existing client base. One company I work with has determined it’s not worth their while to develop a product that doesn’t generate at least $1 million per year while for my largest client, their minimum threshold is multiples of that number. How do these factors translate into evaluation criteria?
A good starting point is to use three principles to guide evaluation (which can be further elaborated on during a strategy session): Alignment, Desirability and Feasibility.
Alignment is whether the new product idea is aligned with your company’s strategic objectives. Second is Desirability – does a customer want this product? Is there is there a demonstrated need for it? What quantifiable problem does it solve for the user? Third is Feasibility and if your company can actually build the product and what infrastructure needs to be in place to make it successful.
Step 4: Selection
Narrowing in on a manageable group of new products to pursue is a function of your evaluation criteria and available budget. This will vary from company to company but for all, a key point is your comfort level in making selection decisions with imperfect information. New products, being new, do not have a track record and any predictions made will likely be wrong. In other words, you must be prepared for some uncertainty and failure.
One company I interact with regularly (but not a client) has a product development program but rarely launches anything new. My impression is they keep looking for more information to reduce the risk of failure but it’s just not possible to gather enough data to surpass their risk adverse decision making threshold. In that company, their corporate culture frowns on failure so I suspect the success of their new product program will be limited.
Step 5: Build in Accountability
Once a new product idea has been selected for development, there can be a sigh of relief. However, the hardest part is yet to come. Not only does a company face the work of building something new but they also have to do it in the context of running an existing business. New product development is strategically important but is often pushed to the back burner when the inevitable day-to-day fires arise.
For this reason, building in accountability is critical and making sure the champions responsible for new product development are held to task; have the time and resources to do their work; and the right incentives are in place (I’m a firm believer that incentives drive behaviour but that’s topic for another post).
Step 6: Repeat Concurrently
Every company has finite resources which means you can’t realistically pursue all of your new product ideas. At the same time, research shows that the majority of new product development efforts fail either completely or do not meet the expectations set for them.
With this in mind, the goal of a new product development program can’t be to pursue one new product idea and hope for the best but build a portfolio of many new products opportunities which are advanced concurrently. Again, this needs to tie back to company strategy and making sure you have the resources in place to manage multiple efforts at the same time.
Summing Up
Considering and implementing these six steps will accelerate your company’s new product development objectives. While the details will differ between companies, they are best used as a starting point and then customized based on your strategic priorities, budget and industry.
Please reach out if you would like to learn more about building a new product development program for your company.