Do You Deliver Great Product - Market (& Business Model!) Fit?

How do companies successfully design products and services which connect with customers through an amazing product experience and a great business model, a theoretical win-win state of affairs? Some considerations:

Too many times I feel companies dilute product or service design and functionality to hit perceived business objectives, failing to account for the potential upside that could be created through a truly great product in tandem with an innovative business model design.

Such potential value is not easily added to a NPV calculation however. Similarly, the positive impact on brand value is hard to quantify and is consequently hard to balance against investment.

An Automotive Example

Nowhere is this played-out more publicly today than in the automotive industry, with the big traditional players suddenly finding themselves challenged on all fronts by upstart car makers and the tech industry, who are bringing all manner of disruptive ideas to the table, and not asking permission first.

The meta-problem to this being the question of how to maintain established and hard-won brand value, as the differentiating elements of cars migrate to digital and user experiences, which people are tending to value more these days.

As Carlos Ghosn, CEO of Renault and Nissan, mentions in his interview with Harvard Business Review “Making the Car a Mobile, Connected Workspace” (October 2016 Issue), giving people options in the driving experience and how they actually use the car, is key to maintaining customer engagement. Yet developments versus associated investments’ impacts remain hard to measure, before, during and often after products go on sale.

Delivering Great Fit and Avoiding Too Much Conservatism

In capital intensive industries, which covers most technology development, this difficulty can drive conservatism in product decisions as a function of investment. However today, with increasing dynamism in markets and the speed of technology development, such conservatism is no longer an option if companies want to stay competitive and continue to build brand value.

This brings about the question that some companies seem to deal with better than others. What product developments and R&D should be invested in, and how much over what period? This should now include proactive market developments and ongoing business model innovation too.

Consumer tastes are ever more fickle and led by perceived value. Even peer pressure and fashion trends, caught up in the swirl of social media, affect such value perception. All of which make large investment decisions inherently risky. A relentless focus on delivering an amazing product, to solve a specific need or create a new market, which delivers an experience meaningful to the customer, whilst creating economic value, is a way to reduce this ROI risk.

A mandate for value creation and delivery to the customer should be built into job descriptions throughout organisations, with appropriate incentives in place. Building this ethos, governance and incentives into established organisations is hard.

Companies should specifically consider:

• Proactive market development, contributing to value perception

• Amazing yet focused product design and functionality

• Putting the customer experience front and centre

• Continuous business model innovation as well as operational incentives

• Hard to measure and intangible, future value creation in investment decisions

In Closing

There’s no silver bullet, but in an age dominated by digital transformation, it is safe to say that companies that focus on these considerations will do better than competitors that don’t.

As software giants increasingly encroach on the prior domain of physical product-driven companies, they may find that those high margins they’re used to, begin to be eroded by the capital expenditure required to build and make mistakes in the hardware world.

We should expect to see some interesting manoeuvring, partnerships, failures and successes over the next few years. I hope for some good surprises too!