The process of ideation is to focus on all the possible unmet needs of the customer. Later on, to figure out how to address those needs in a much more effective, efficient, optimal, user-friendly manner and at an attractive price point that is economically viable to customers. I do extend the same definition for Products as well. In my opinion Products either meet the needs of the customer or enhances their experience. They do so in more optimal way in comparison with the competition at a price point that customers can afford or willing to pay. Ability to afford or willingness are two different things, even though your target customers can afford to buy the product they don’t buy unless they feel that the value obtained is worth the price. On the contrary, the customers market might be willing to pay the price but they could not afford. So it is essential to look at both the factors. In case of ‘Willingness’ without ‘Affordability’, it can open doors for new low cost product idea. Much of this space might fall under the category of ‘Fortune at bottom of the pyramid’ devised by C.K. Prahlad.
After formulating an idea depending on the unmet needs of the prospective customer, we need to start validating the idea. The validation process really depends on the nature of the idea. If the idea is an extension of an existing product line, then your existing customer base could act as a sufficient sample for idea validation. The existing products could be over serving/ underserving the target segment or could not meet the needs of a specific segment. So the new product could complement to the existing product line to address the needs of a new segment or unmet needs of existing segment or replace existing product to address the needs of existing segment. In any case, I don’t think it would be too difficult to validate the idea. However if the idea is revolutionary and creates a new product category, then we could possibly consider customers using the perceived alternative. For instance, in case of 1st mobile device, we could have validated the idea of mobile device with users of pager. However in case of revolutionary idea, it is not always advisable to purely rely on customer. In case of 1st mobile device, the customer would be excited about receiving the voice call anywhere/anytime instead of just text. But they could not think beyond the device, for instance success of mobile devices also depends on the operator’s capability to launch the service at an affordable price and governments willingness to auction available spectrum for voice call services. For operators as well, it is huge CAPEX to deploy the required infrastructure. So success of the product really depends on various external factors and this is precisely what I call a product ecosystem.
Timing new product
The larger discussion that needs wider attention is to figure out the right time to start new product development. Timing of the new product is also dependent on whether the new product is an extension to an existing product line or does it create a new product category (most probably a revolutionary idea). In case of new product creating a new product category, there is already unmet needs so the emphasis should be more on hitting the market first. However from the timing perspective, we need to figure out whether the product ecosystem that is required for the success of the product exists. For instance, in case of 1st mobile payment product like m-pesa, the success really depends on the density of mobile usage among rural population and network coverage in rural areas. SPOT (Smartwatch my Microsoft) is a classic example of product release way ahead of its time. The product ecosystem was not too conducive for the success of the SPOT. The discussion bring us to back to the topic of product ecosystem that we discussed during ideation, while timing the new product we have to ensure the readiness of the product eco-system aligns the new product release. I have elaborated more about this topic in earlier blog post ‘Detailed requirements gathering – PRD’
However in case of new product belonging to an existing product line, we need to figure out the timeline to develop new product based on deeper understanding of how customer requirements would evolve during the product development phase. Customer might not be able to articulate what business challenges they might face in future, based on the trends impacting the product and the general understanding of the customer business environment, we might need to anticipate customer requirements and ensure that the product being built will optimally address the requirements of the customer when it is released. Other aspect is to watch out for signs (competition, trends, new technology, win/loss trends and declining revenues etc) that would signal the need for new product development. Please take a look at my previous relevant blog posts
- How not to ignore warning signal – To arrest product decline
- The need for periodic introspection of target market – Part II
Estimating market size
Identify the target customer and estimate the total population of the target customers (we generally call it as TAM – Total Addressable Market) and finally estimate how much of entire TAM can the new product penetrate. Available statistical data or guesstimates could be used to estimate the TAM. The idea might have a global appeal but for some strategic reasons we might target local market first. We need to outline which segment (based on demographic) of TAM are we targeting first. For instance, cloud based education SW to facilitate teaching on a dump terminal is a universal idea and it has global appeal. But initially, we might focus on local geo-market before expanding globally. In any case, the estimated market size should include both.
After estimating the market size, Product Manager has to ascertain whether the size of the market is large enough to break-even and make margins. Firstly understand whether customer can afford to buy the product and is willing to buy the product. Ability to afford or willingness are two different things, even though the target customers can afford to buy the product they don’t buy unless they feel that the value obtained is worth the price. On the contrary, the customers might be willing to pay the price but they could not afford. So it is essential to look at both the factors. In case of ‘Willingness’ without ‘Affordability’, it can open doors for new low cost product idea. Much of this space might fall under the category of ‘Fortune at bottom of the pyramid’ devised by C.K. Prahlad. If the customer is willing to buy the product and can afford to buy the product, determine whether the market is big enough for making profits based on the estimated TAM and penetration rate.
We conclude the ideation phase trying to evaluate whether the new product is aligned with the organizations goals and strategies. The new product development would not be approved unless Product Manager establishes how the new product would align with overall goals and strategies of the organization. Next is to evaluate whether the organization has the required capability and experience to build the new product.
Final Word: More often, an idea might evoke a “WOW” feeling among customers. However one should cautiously evaluate whether sizable number of customers can afford and ready to pay the price to experience the “WOW”. Remember Iridium! Even though it was a great product idea (in spite of some technical glitches), only smaller chunk of customers could afford it.