Thinking about launching a new product?
Getting Started
People pitch their ideas to me all the time. After going over some details about their concept, I typically ask, “how much do you think your customer would be willing to pay for that?” This is when the look of disappointment shows up. The point of asking the question is not to be a dream killer. Not at all. Instead, the point is to help ground expectations.
Good ideas are not necessarily good business ideas. I would love to be able to add dishwashing capabilities to my cabinets to avoid the operational inefficiency of dishwashing. However, I am personally not interested in paying a premium to satisfy that need. Not that dishwashing cabinets are a universally desired product, and good ideas do not necessarily translate into sustainable business ideas. Even if the business is sustainable, you have to decide whether the required business model is robust enough to handle changes in the market over time.
To avoid investing heavily in an unsustainable business idea, here are some tips for setting you off in the right direction.
1. Understand the job-to-be-done
A lot of exciting product ideas take the form of an intuitive solution. Generally, intuitive solutioning is necessary but insufficient for developing a good business idea. This is where most people have a hard time. If you presuppose a solution, you risk solving the problem for people precisely like you. In my industry, we use the phrase “eat your own dog food” to acknowledge that we may be our own customers. Unless you are solving an internally focused problem at your business, it is best to broaden your target customer.
Defining your target customer can be done through a customer discovery process. The approach will vary from industry to industry. In principle, your target customer has a pain point, and your goal is to determine what it is. There are two components to this: 1) the definition of the customer and 2) what job they want done. Some people will argue that you have to start with one or the other. In my experience, where you start does not matter because you will eventually redefine them through an iterative process.
I am a male who works regular business hours, has outside work obligations, and has a family. Washing dishes is a time-consuming process, especially since it involves time-delayed activities. The job I want to be done is getting my time back so I can spend it more productively with my family.
2. Identify your unique brand and value proposition
Many people will jump straight to the solution itself after defining the customer and the job to be done. This approach can work, but like before, solutioning is necessary but insufficient. Defining that solution and your brand and value proposition go hand-in-hand is an iterative process. Visionary thinking is often associated with ambitious projects, but not all solutions require this. Simple solutions are often preferred over big ideas because they can be more efficient at delivering value.
The optimal solution to eliminate dishwashing from daily chores, for example, may not be consistent with your company’s brand of low-priced consumer goods. On top of that, you have to determine what is about your offering that will convince customers to either switch to you or become a new customer. These forces can change how you engineer your product and what features you include or disclude.
3. Map out your costs and revenue channels
After you have determined what you will be offering and to whom, you will need to determine how to monetize it. For some products, like certain kinds of software, revenue channels may change how engineer the product. Generally, however, you will need to map out where money is going to come from when you deliver your product to customers. Is it retail sales, direct to consumers, advertising, etc.? Since you have an idea of what it is that you will be developing, you can additionally map out where your costs will come from. There will be manufacturing, sales, development, supply chain, staffing, and other costs for you to consider. Keep in mind that specific numbers are not necessary at this point.
If I were developing a dishwashing solution to save customers’ time, I would want to consider costs associated with distribution partners, open innovation, engineering, and fixed and variable production costs. Direct to the consumer might be a way to go, but I would also explore using home builders and renovation services as sellers to include the dishwashing solution in their services.
4. Measure yourself and hold yourself accountable
Setting up key performance indicators (KPIs) will help track how well you execute your plan. The KPIs can be unique to your business, but there is nothing wrong with sticking with conventional metrics. These metrics can include the number of sales leads, customer conversions, customer reviews, year-over-year revenue growth, etc.
Rinse and Repeat
A common theme across these four steps is the interdependence of business functions. Going through these steps in sequential order can help, but it is not completely necessary. These steps are part of an iterative process, so picking an area to start is acceptable. However, it does not matter how well thought out your idea is if customers are unwilling to pay for the solution. You can additionally use this process to help revector your existing solutions, especially if you pair it with catch-up innovation.
What that said, I would argue that if customers are not willing to pay for a great idea, then your target customer may be poorly defined. This is why I strongly recommend that you define your customer first. I am not interested in paying for dishwashing capabilities built into my cabinets, but a food truck owner or tiny house manufacturer might. Different people, different constraints, and different values.