Contrary to popular belief, pioneers – those businesses that develop the most innovative new products – rarely go on to become long-term market leaders. Often, that’s because their ideas don’t fit the wider market, with an estimated 34 per cent of start-ups failing due to a lack of product-market fit.
In our experience of helping pioneering organisations, those that succeed do so because they test new ideas and find good product-market fit early, before investing all their time and money into a ‘finished’ product. They’re masters of product management.
But a vast number of organisations, both start-ups and established businesses, don’t give their product management capability the authority to work with the customer to generate and test pioneering ideas in a cost-effective way. Those organisations end up flying blind, developing products and services with little idea of what customers really want and need.
This stark contrast between pioneering winners quickly innovating to steal a march on the competition and other organisations slowly working towards an untested ideal raises one question: How can organisations use product management to secure success?
A well-functioning free market system shows how failure leads to progress. Weak ideas are discarded. Successful ideas are replicated. And the whole system becomes stronger. Organisations should embrace this thinking. The risk of investing in weak ideas, even if they used to be strong, is too high.
At a portfolio level, your product management leaders should develop product visions with measurable strategies, be bold enough to pivot away from initiatives that aren’t meeting expectations and persevere with those that are. The goal of your product portfolio is to build and maintain products that will power a sustainable business long into the future.
At a product level, leverage small-scale product releases to test customer expectations. This will let you pivot away from those that ‘fail’ and make more informed product prioritisation and design decisions.
For example, Airbnb started by renting air mattresses in a San Francisco apartment to conference attendees. But this proved unsustainable when conference numbers reduced. So, the co-founders pivoted their concept to travellers looking for cheap accommodation and an authentic local experience. The company is now worth around $90 billion.
It’s impossible to effectively plan and build a single solution to a customer problem without their involvement and multiple iterations. Testing new, potentially pioneering ideas using a traditional product development method can take months to uncover whether the product meets the customer’s needs. For example, a recent study showed that 80 per cent of digital, cloud-based product features are rarely or never used.
Organisations should adopt three principles to create more lightweight and cost-effective ways to test and build new ideas:
Design Thinking is a human-centered, iterative process for cultivating and prototyping new ideas. It helps develop empathy for your customers’ needs and expectations. It starts with customer research to understand and reframe the customer problem within the context of your organisation. It then uses the resulting information to rapidly generate innovative ideas that will solve the customer challenges before rigorous evaluation assesses suitability. Design Thinking has helped a range of innovations, such as the development of a dignified and clean sanitation system for people in rural Africa.
Lean Start-Up is a methodology for developing businesses and products that aims to shorten product development cycles and rapidly discover if a proposed business model is viable. Taking new ideas and building small increments in short build-measure-learn cycles enables the organisation to test solutions with the market. While meticulous use of metrics to measure product usage supports ‘pivot or persevere’ decisions. DropBox famously used a simple video to demonstrate their product vision and learn from early adopters in a cheap and simple way, helping secure investment to build and scale the product.
Agile is an iterative, incremental, customer-centric method of solving problems. Self-organising teams build and scale new ideas iteratively, releasing value on a regular cadence. Products are broken down and delivered in small chunks, enabling a faster time to value. Zara, the fast-fashion company, for example, releases small batches of clothing to the shop floor in different locations, releasing value while learning from customer behaviour.
Can old dogs learn ingenious new tricks?
Product management’s core responsibility is to generate, test and build upon innovative ideas, ensuring they’re viable and feasible while adding value for both the customer and business.
So, afford your product management capability the time and space to understand the needs and expectations of your customers. Engaging with customers regularly provides invaluable insight and validation around how your effort and investment has been received. It also develops empathy for your customers, which is crucial to maximising return on investment as it ensures your products facilitate your customers’ desired outcomes. This is becoming more important than ever as the context in which your business operates is constantly evolving, as are your customers’ expectations.
Patagonia, the outdoor clothing company, has long associated itself with an environmentalist mission statement, a goal that resonates among their primarily young-adult customer base. Publicly listing the mills and factories where they produce their apparel, enforcing a strict supplier Code of Conduct and offering a ‘repair and resell’ service has built confidence and trust that they are preserving the environment, meeting their customers’ sustainability values.
Adopt a hypothesis-driven approach – leveraging data and feedback to test assumptions – and small product releases to enable your product team to regularly test new ideas with your customers. A/B testing will enable you to make data-driven prioritisation decisions that sustain innovation while pivoting investment away from less successful products and features.
From the COVID-19 pandemic to the green revolution, the context in which your business operates is constantly evolving, as are your customer’s expectations. Developing empathy for your customers and pivoting your strategy around this understanding is crucial to maximising value from investments. That’s why building a strong product management capability is the key to success.