The Innovation Imperative: Overcoming Obstacles to Product Excellence
Are you trying to catch up to your competition or overtake them?
In today's relentless market landscape, innovation is no longer just an imperative for established companies; it's about striking a strategic balance between essential improvements and the pursuit of groundbreaking innovations. Gone are the days when industry giants could solely rely on their legacy and existing customer base to maintain market dominance. Now, the urgency to innovate not only demands leading the charge in setting new standards and transforming market expectations but also necessitates a meticulous assessment of core offerings for necessary enhancements. For product managers in these organizations, the mission is clear yet complex: to navigate the vastness of their companies towards innovation that not only meets but anticipates future trends, while ensuring that vital updates do not obstruct the resources for revolutionary advancements. This equilibrium between incremental improvements and pioneering innovations is critical, transforming potential disruptions into opportunities for sustained leadership and growth, and achieving the optimal financial results. It underscores the notion that the true art of strategic management in innovation lies not in choosing between updating core offerings and investing in new ventures, but in adeptly balancing both to foster enduring success.
The Common Misconception
The myth that innovation is too costly or time-consuming persists, especially when backlogs are brimming with "must-have" features for the next release. This misconception often leads to a focus on catching up rather than leading through innovation, particularly in conservative industries. However, true progress requires seeing beyond immediate demands. Every product iteration presents an opportunity for innovation — it's critical not to overlook this potential in the rush to deliver what's asked for.
The True Cost of Ignoring Innovation
This fallacy is repeated over and over by well-established and even young companies. Feedback from a few customers about the features that they want put pressure on managers to deliver to customers what they have asked for. Are the requests accurate representations of what the broader customer base wants? At this point it is often forgotten to ask a few critical questions that can put the seeming feature pressure in perspective.Are the feature requests in reality just indicators of a problem and not necessarily the best solution? Are you put under pressure to quickly deliver a product rather than deliver the right product? User research and methodical prioritization can mitigate these costs by ensuring that innovation efforts are aligned with customer needs.
The Changing Landscape of Customer Needs
Innovation is essential as customer needs evolve rapidly, driven by their experiences across diverse products and industries. This dynamic shifts expectations, turning today's novelties into tomorrow's standards. Jeff Bezos encapsulated this sentiment, noting customers' perpetual desire for improvement. For product companies, this means continuously adapting and innovating to meet and exceed these evolving expectations.
Innovate Before Your Products are Perceived as Stale
This proactive approach to innovation ensures that a company consistently refreshes its offerings, keeping them at the forefront of technological advancements and customer expectations. Understanding the level of innovation your products are perceived to have is crucial, as it directly influences customer engagement and your brand's competitive edge. By initiating the development of the next generation of innovation while your current products are still considered cutting-edge, companies can secure a continuous cycle of market leadership and relevance. This strategy not only reinforces a brand's image as an industry innovator but also preempts potential competitive threats by setting the pace of change and dictating market trends.
Adopting a proactive innovation strategy entails a deep dive into market dynamics, customer behavior, and the broader socio-economic factors that influence purchasing decisions. It's about keenly observing the Innovation Diffusion Theory's insights, understanding where your products stand in the adoption curve, and strategically planning your innovation pipeline to align with these insights. Innovating ahead of the curve allows companies to meet evolving customer expectations with agility, ensuring that they are always seen as providing value and novelty. Moreover, this approach enables businesses to manage their product lifecycles more effectively, optimizing the timing of new releases to maximize engagement and return on investment. Ultimately, staying ahead of the perception of staleness not only drives growth but also builds a resilient brand capable of thriving amidst the constant flux of consumer preferences and technological advancements.
Prioritization Pitfalls
The problem isn’t that businesses have too many priorities. The problem is that product teams often are very poor at gaining valid customer insights, to define needs and drive prioritization. A Forrester Consulting study showed the key methods companies use to prioritize which products are built:
47% Committee decides from potential options
24% Financial modeling (e.g. Economic value optimization)
13% Opinion of person with highest salary wins out
9% Product portfolio approach
7% No systemic approach
Of these various approaches, the financial modeling makes the most sense. However, if you only get 3-5% ROI, you shouldn’t stick your money into product development, but rather find a good fund to invest in.
So, you need reliable methods to best determine what customers need and how you can differentiate from competitors, to get a larger market share and in turn higher ROI. Product teams are usually pretty good at determining if they have the skills and resources to build something. They can often quickly determine if they have the distribution channels and develop the product at a profit. However, many need to improve how they gain the customer insights that guide them to new products or features. Also, they struggle with prioritization.
Gaining Valid Customer Insights
Effective user research is key to generating actionable insights and validating hypotheses. Specialized User Research experts are crucial for avoiding bias—specifically, confirmation bias—and ensuring the data collected accurately represents your target audience. This approach moves beyond merely addressing customer-stated needs to uncovering deeper problems and opportunities for innovation, setting your product apart in the market.
Keep in mind that when you talk with your customers they are likely to be less critical out of politeness and they may downplay the value of something to stay in a better position to negotiate.
Two Approaches to Prioritization
There are numerous ways of prioritization, and it is easy to get overwhelmed by the approaches. For many companies, it is enough to do an Impact and Effort Analysis. How much impact will a feature make for a customer and what will it cost us to develop this? If you can base the impact on the research that you have done, this can be very solid.
There is another model, which I find more helpful and that is the Kano Model. With this model, you find a way to balance those features, which are necessary to be relevant on the market and those features, which help you differentiate. It is a model to help you determine Basic, Performance, and Excitement features. The Basic features are those that must be there to be considered relevant. As you dig into these features, they won’t be the ones that help you differentiate, so you want to do them well, but with as little effort as possible. The Performance features will give you a proportionate increase in customer satisfaction as you invest in them. Now Excitement features are those that will particularly delight and attract customers. These are often your innovation features.For instance, in a market where many products seem similar in price and performance, standing out requires something unique, like offering a product made entirely from recycled materials. This attribute aligns with growing consumer demand for sustainability and can be the differentiating factor that elevates your product above competitors.
Additionally, it can tell you which features, if added, will hurt customer perception.
Innovation as a Path to Long-Term Success
Across industries, studies have consistently shown that innovation is key to long-term financial success. Product teams must balance immediate demands with the strategic pursuit of innovation to remain competitive and satisfy evolving customer needs.
In established industries such as Healthcare and Finance there are several factors inhibiting innovation such as cultural and organizational resistance, resource allocation, and speed to market. Using this approach, however, it will clarify how to invest the limited resources at hand. By involving the team in the process, it will create buy-in and produce a much more efficient development process. In both industries, there is a huge amount of wasted development effort. Constantly changing requirements and products being killed late in the process are huge drains on the finances and motivation of teams. For both industries, it is important to have legal and risk management part of the prioritization effort. This is usually done late in the process, further raising costs. Early involvement avoids changes to any assumptions that are fundamental to your project.
Leveraging User Research and methodical Prioritization (Impact vs Effort and/or Kano Model) approach can help you efficiently prioritize your team’s time on a project. But, it can be expanded to work across an entire portfolio, too. I plan to write an article for you on my approach to portfolio planning.
For companies looking to introduce this, it is best to start small and slowly grow the effort. It will take a while for a team to adjust to this new approach. I would highly suggest starting with a software-only project (no hardware) and one that is relatively small in scope. It will also require leadership support. In fact, without leadership understanding this and pushing for its implementation, it will be very challenging to create the cultural changes necessary for it to get established.
The Industrial Double Diamond Process
The process is an innovation methodology designed to navigate the complexities of developing new products or services, with a particular emphasis on sectors facing stringent regulatory requirements, such as the medical device industry. Here's an overview of the process:
1) Idea Purge
The Idea Purge is the first phase of the Industrial Double Diamond Process, where team members express all existing perceptions, assumptions, and biases about the project and problem. This open session aims to lay everything on the table—every initial thought, bias, and speculated solution—to ensure these preconceptions are acknowledged and addressed. The purpose is to clear the mental decks, recognizing that to move beyond current assumptions, they must first be named and understood. This sets a clear stage for innovation, free from the constraints of unspoken biases, and prepares the team for a more informed exploration in the following phases.
2) Problem Space
Reframe: This step involves challenging initial assumptions and perceptions to formulate hypotheses about underlying user needs and opportunities, setting the stage for targeted innovation.
Validate: Conduct thorough user research to validate the refined problem definitions, ensuring they resonate with actual user experiences and needs.
Iterate: This involves a dynamic, continuous refinement of the problem definition. Here, crafting a compelling value proposition becomes part of the iteration process, clearly communicating the unique benefits of the proposed solution based on ongoing user feedback and insights.
3) Solution Space
Ideate: In this phase, ideation and concept development are merged with prototyping efforts to generate and evaluate a wide range of potential solutions. This step is guided by insights from the Problem Space and encourages the generation of tangible concepts for exploration and testing.
Validate: This crucial step involves testing prototypes with users and then prioritizing features based on the feedback, using tools like the Kano Model and Impact versus Effort Analysis. This process includes assessments of technical feasibility, regulatory compliance, and business viability to ensure the solution meets both user needs and regulatory standards.
Iterate: Refine the solution through iterative development cycles, informed by user feedback, technical assessments, and business considerations, to hone in on the most effective and compliant solution.
4) Implement
The final phase transitions the process into a development phase that embraces iterative cycles and continuous feedback, crucial for sectors like medical devices. This phase requires a balanced approach to innovation and compliance, incorporating activities such as simulated use testing, preclinical studies, and phased clinical trials. Feedback from healthcare professionals and adherence to regulatory considerations are integral, ensuring the development process is both innovative and compliant, paving the way for a successful market introduction.
The Industrial Double Diamond Process ensures a disciplined yet flexible approach to innovation, from the initial ideation to the final implementation, with a specific focus on meeting the unique challenges of regulated industries.
Be the Catalyst for Change
Innovation is not just a strategy; it's a mandate for survival and success. As product managers, you have the power to be the catalyst for change within your organizations. By leveraging user research, embracing methodical prioritization, and navigating the balance between current demands and future needs, you can set a new standard for excellence. Don't wait for the market to dictate your moves. It's time to redefine what's possible and lead your products to new heights. The future is in your hands; how will you shape it?
