Product Development Strategies for Start-ups
In entrepreneurship, innovation seldom happens by accident, and only 10%-20% of new companies succeed. For start-ups, success usually means that the value of up-front investment has been returned after an innovative product or service was launched.
Why are the chances of success so low?
Beyond the common risks and pitfalls of forming a new company, myriad challenges exist for all companies developing an innovative new product, whether taking place at an established company or at a start-up. To have a chance, start-ups must be solely focused on the customer's pain point and work to deliver only one product at a time. The sole focus on one product means a start-up can be thought of as a new product development team. However, this team is typically not one with decades of experience, operating within a well-functioning system. Instead, most start-up teams are being formed, built, and tuned all at the same time.
What is your innovation strategy?
Founders start a new business for many reasons, fueled by passion, inspiration, and excitement to do something new, different, or better than others. The to-do list at a start-up is endless, and there's no training or job description provided by upper management. Often product development strategies and processes are overlooked amidst the constant to-dos and the rush to capture the new market opportunity. Unless you've done it before and are carrying a time-tested playbook, you likely don't know what you don't know about product development.
While there is no single method applicable to every start-up, a sound innovation strategy for any team is to learn about product development and determine what method(s) are most appropriate. An innovation strategy is a plan chosen to bring about a desired future state. It incorporates an organization's unique position and defines how resources and skills should be combined to achieve a competitive advantage. Without a strategy, it is difficult to make systematic trade-off decisions about how to apply a start-up's scarce resources.
Here are four core elements of an innovation strategy all start-ups should consider:
Conduct Market Research
Use a Product Innovation Process
Use a Product Development Process
Implement Product Lifecycle Management
To that end, here is a brief summary of the key areas in new product development that any start-up team should become more familiar with:
#1: Conduct Market Research
The most important strategy for a start-up to follow is implementing a process to identify and validate a problem worth solving.
Is there a market for the product or service?
Does your team have the skills, experience, and resources?
Is your team uniquely positioned to address it and do you have a competitive advantage?
One of the most common reasons start-ups fail is a lack of product-market fit. Finding a worthwhile problem can be one of the most challenging aspects of entrepreneurship. Once a problem has been identified, the customer need and market size should be validated. Additionally, initial customer input on features and functions should be gathered. A key output from market research should be an initial statement of the user needs and high-level product requirements.
Tools for identifying and validating the problem include voice-of-customer surveys, primary and secondary market research, focus groups, customer interviews, surveys, panels, ethnography, and concept tests. The problem can be validated through tools such as competitive analysis, SWOT and PESTLE analysis, A/B testing, prototype use testing, and crowdsourcing.
#2: Product Innovation Process
While the word innovation can suggest major breakthroughs and patent-worthy ideas, innovation is more about creating value for the customer in any form. For example, this can be done by combining two existing things in a new way that solves a real customer problem. The innovation process creates the structure to allow for iterations, experimentation, and early customer feedback. The key learnings gained through these iterations are captured at each stage and should provide insight about whether you are creating value for the customer, or not. An innovation process should allow for creativity and the inherent messiness that comes along with doing something new. A product innovation process is a way of managing risk and change while increasing the chances of successfully bringing a product to market. Committing to and following an innovation process as a start-up will increase the chances of success significantly. Each start-up is unique, and choosing a process that is relevant to the problem being solved and the product type is key. Many processes have been developed and implemented for different markets. Here is a list of some of the primary innovation processes applicable to start-ups:
#3: Product Development
Product Development refers to the activities and stages undertaken to design and develop a product. It is a discrete stage within a product's overall lifecycle, culminating in market launch. Within product development, there are tools and processes that can be tailored to the specific type of product being developed. The primary goal of product design and development is to create a product that meets the identified customer needs.
The product design and development process needs to address the following core aspects:
Customer needs & wants
Non-recurring engineering or design budget
Cost of goods and ability to achieve viable margins
Manufacturability
Supply chain
Environmental impact
The primary process steps relevant to a start-up company are:
User requirements
Idea generation and feasibility
Concept design
Design for manufacture
Detailed design
Fabrication and assembly
#4 Product Lifecycle Management
Product Lifecycle Management (PLM) is a comprehensive approach to managing the entire lifecycle of a product from its conception, through design, development, manufacturing, launch, and eventually, disposal. PLM and project management are interrelated and are easily confused. Project management is the general application of processes and resources to achieve an outcome or create a product or service. Utilizing project management throughout the product life cycle will ensure that an organization’s budgets and timelines are achieved.
PLM is also considered a product innovation management approach, where a product manager is responsible for creating the product vision from a deep understanding of the customer needs. The PLM can be coordinated through a software tool or system that is designed to integrate processes, data, business systems, and people throughout the entire product lifecycle. The main goals of PLM are to increase efficiency, reduce costs, accelerate time to market, and improve product quality.
Some of the key strategies in PLM include:
Product and technology roadmaps
Financial models
Demand forecasts
ROI calculations and payback periods
Project management
Developing a go-to-market strategy
Wrapping it up
Having a product development strategy is essential for startups to ensure success in the marketplace. A comprehensive plan will help maximize resources, minimize risks and achieve long-term goals. Market research provides insights into customer needs and competitors’ strategies that can be used to inform product innovation processes. Product development should focus on creating competitive advantages over rivals while taking advantage of opportunities for growth. Finally, effective product lifecycle management helps optimize resource usage and increase profitability in the long run.
By having an informed strategy with market research at its core, startups are better equipped to create products that meet customer demands and remain ahead of their competitors in today's ever-evolving landscape.