Coming up with innovative products and services that become successful is a challenge. Established companies and startups spend billions of US dollars on product research and development every year. Studies reveal that 40-50% of those investments are wasted on new products and services that get canceled due to poor results.
At Voa Labs, we apply a framework to test the likelihood of innovative solutions becoming successful from the very beginning of the product development phase. In this article, we give insight into this framework.
The likelihood of an innovative product or service becoming successful can be significantly increased if it meets three criteria. First, customers need to desire a solution. Second, it must be feasible to implement the solution. Third, the solution needs to have a viable business case that works out financially. The innovation sweet spot sits at the intersection of the three. Let’s dive into the details.
The product development process starts with putting customers at the center. Products or services need to be desirable to end users by having a positive impact on their life. To find out if people desire a product or service requires empathy, particularly the capability to understand the hopes, desires, and aspirations of those you are designing for. There are a handful of methods to capture the mindsets and needs of the people you are building a solution for, such as interviews or immersion.
When we identify a need for a product or service, we first have to figure out if it is a “vitamin” or “painkiller”. “Vitamins” are solutions that customers consider as „nice to have“, while “painkillers” are “need to have.“ With “vitamin” products or services, you have to explain to potential customers some non-urgent problem and convince them that your pill is the solution. Compare this with a “painkiller”, which customers seek when they face an issue. A good place to start when coming up with a painkiller is to look for a pain that people experience. Once this is discovered, we design a relieving solution. To use an analogy, look for people holding their forehead and build a remedy for it. Do not create a pill and then look for an illness that the pill can cure. Although you might get lucky, the chances of landing a hit are small.
Here are some key questions that help to determine if a solution is highly desirable:
- Does the solution fill a need?
- Is the solution a “vitamin” or a “painkiller”?
Desirability is only one lens through which we look at potential solutions.
A solution needs to be technically and organizationally feasible. Even though a product or service is highly desirable, it may not be possible to build it within time and budget constraints. If the requirement is to have a project done in three months, yet our solution is projected to take seven months to complete, it is not a feasible solution. For example, without question curing cancer is highly desirable. But unless an immensely long project duration and a massive budget are provided, the solution is unlikely to be feasible.
A solution is not only required to be technically feasible, but it also needs to match organizational capabilities. A startup may have the ability to build a product quickly in an extremely agile way. While an established corporation may have the human resources, expertise and financial resources to work on a complex solution over a longer period. Besides having the ability to build a solution, it must also be feasible to operate it. We also ask ourselves if the solution can be managed and kept alive after deployment. An organization needs to have the capabilities to run a solution sustainably and stably in the long run. Of course, there may be the possibility to make organizational changes so that operating the solution becomes feasible.
Here are the key questions that help us test if a solution is feasible:
- Is it feasible to build the solution within the given time and budget constraints?
- Do we and our client have the technical capabilities to build and operate the solution?
- Do we and our client have the organizational capabilities to build and operate the solution?
The final test for a solution focuses on its economic viability. A profitable business model needs to be built around a product or service. Oftentimes, startups and teams of corporates make the mistake of working on new solutions that customers desire, and even find a way to implement and run those solutions. However, they miss assessing if there is a viable business model until the first version is implemented.
The cost of a solution must be covered by the revenue it generates. It is quite possible that a solution’s business model may not be profitable initially. But it must be determined how and when the business model becomes profitable. If no path to profitability can be found, the business model must be revised. A startup likely needs to break even faster than a large corporation, which can cross-subsidize a new solution over a longer period.
After a viable business model for a solution is found, it makes sense to question whether there are ways to make it even more profitable.
Some products and services pursue other goals than achieving monetary benefits. In this case, the alternative aim needs to be clearly defined in the form of some quantitative outcome. If the benefits of the desired outcome do not outweigh the investment, it might be a good idea to reiterate the solution idea.
Here are the key questions that help us test the viability of a solution:
- How can we build a sustainable business around the solution?
- How much will we charge for the solution?
- What are the costs to develop and operate the solution?
- How can we make the solution even more profitable (e.g. by lowering cost and/or increasing price)?
Finding the innovation sweet spot is a balancing act
Coming up with a solution that is desirable, feasible, and viable is a balancing act, but one that is crucial to master when designing successful products and services. The key is to iterate product and service ideas, and assess and reassess them for these three core criteria. A solution has a high chance of being successful if it is desirable, feasible, and viable in the context of a specific organization.
Joël Sonderegger is the Founder & Managing Director at Voa Labs. He helps his team strategize, design, and engineer products that enable businesses to transform their ideas into digital solutions, while energetically steering all aspects of Voa Labs’ operations.
Previously, Joël was a VP of Product Management at Sygnum, the world's first digital asset bank. Prior to that, he worked at Zühlke and IBM, where he gained his passion for agile, high-tech environments in which creativity and collaborations are proactively encouraged.
Joël holds a Master of Business Innovation from the University of St. Gallen (HSG) and a Bachelor of Business Administration from Zurich University of Applied Sciences (ZHAW).